The Kingdom of Saudi Arabia is the largest state on the Arabian Peninsula. Borders on Jordan, Iraq, and Kuwait in the north, Qatar and the United Arab Emirates in the east, Oman in the southeast, and Yemen in the south. It is washed by the Persian Gulf in the northeast and the Red Sea in the west. Saudi Arabia, with its colossal oil reserves, is the main state of the Organization of Petroleum Exporting Countries. From 1992 to 2009, it ranked first in the world in oil production and export (National accounts 2017, 2017). The given economic brief will focus on Saudi Arabia’s GDP and its percentage change by comparing two different periods of time.
The real GDP of Saudi Arabia in 2018 is equal to 2,949,457 SR million, whereas the given value for 2017 is equal to 2,575,269 SR million (Gross domestic product, 2020). Figure 1 shows the real GDP growth from 2011 to 2019, but the given report will analyse only the last two years. There are significant differences between the GDP values of 2019 and 2018, where the overall GDP fell drastically in comparison to the previous year. However, it is important to note the fact that the non-oil sector expresses a steady growth. There is a substantial growth of both the oil and non-oil sector in 2018, which is expressed in the overall growth of the percentage values.
It is also important to understand the annual growth rate values by assessing the key industries responsible for the total growth. Figure 2 illustrates the major sectors of the Saudi Arabian economy for 2019 and their growth rate for the given year. It is evident that the finance, insurance, and business service sector experienced the growth the most (Gross domestic product 2019, 2019). At the bottom part of the graph, it is possible to see that petroleum-related industries drag down the GDP values because they demonstrate negative growth.
Foreign exchange earnings from oil reached 45 billion US dollars, or approximately 85% of all export earnings (National account indicators Q1, 2019). High oil revenues contribute to accelerated industrial development as part of five-year plans. Industrial production growth in the 80s and 90s of the 20th century reached 10.5% per year, the GNI is equal to $1,804 trillion (National accounts 2018, 2018). The mining industry, the production of chemicals, building materials, metal products, plastics, fabrics, food products are developing rapidly. The success of Saudi Arabia in agriculture is impressive. The country fully provides itself with basic foodstuffs and even exports wheat, vegetables, chicken eggs, poultry.
The discovery of oil fields has turned Saudi Arabia into a wealthy state, but at present, thanks to advances in trade, industry, energy, agriculture, construction, and banking, the Kingdom has become one of the fastest-growing countries in the world. Saudi Arabia currently occupies 20th place among the exporting countries and is economically the most dynamically developing country in the Arab world (National account indicators, second quarter, 2019).
Huge amounts of money were invested in the infrastructure of the Kingdom, that is, roads are being built at a speed of 1100 km per year, new houses, hospitals, schools, and industrial enterprises are being built. In less than 60 years, the Kingdom has transformed from a country with dirty winding paths and undeveloped agriculture, and almost absent industry into a prosperous state with a broad-based, strong and stable economy.
The economy of Saudi Arabia passes a test of strength during crises. Saudi Arabia successfully passed similar tests, when in the eighties revenues from the sale of oil fell sharply. The government of the Kingdom and the private sector quickly adapted to new conditions. Long-term planning, which ensured the growth of economic efficiency and the expansion of the production base of Saudi Arabia, brought its long-awaited results.
Costs decreased significantly and production costs decreased. Encouraging private sector development and other realistic programs continue to strengthen Saudi Arabia’s economic strength and stability. Oil and gas reserves in Saudi Arabia remain its largest national wealth and largest source of income. In the Kingdom, there are more than a quarter of the world’s discovered oil reserves, which are available.
Every day, approximately eight million barrels of crude oil are produced in the Kingdom, of which nine country’s refineries produce approximately 1.8 million barrels of gasoline (National account indicators, quarter 3, 2018). The Saudi oil company ARAMSO, which is the largest producer of petroleum products in the world, is currently working on new methods of marketing and refining oil. Research continues to seek and discover new deposits underground. Thanks to the development of other industries and trade, the share of the oil industry in the gross domestic product is currently only 36%.
The main advantages of the country are its huge reserves of oil and gas and the excellent associated processing industry. Well-controlled surplus and stable current income and large tourism income. However, the weaknesses are undeveloped vocational education and high food subsidies. Import of most consumer goods and industrial raw materials and fear of instability due to market oil price spikes. The economy of Saudi Arabia is based on the oil industry, which makes up almost half of the country’s gross domestic product. A third of budget revenues and the bulk of exports are petroleum product exports. Moreover, unlike other oil-producing countries, in Saudi Arabia this figure is constantly increasing, thanks to the discovery of new fields. Saudi Arabia plays a key role in the organization of petroleum exporting countries, through which it regulates world oil prices.
Reference List
Gross domestic product (2020). Web.
Gross domestic product 2019 (2019). Web.
National account indicators, quarter 3 (2018). Web.
National account indicators, second quarter (2019). Web.
National accounts 2017 (2017). Web.
National accounts 2018 (2018). Web.
National account indicators Q1 (2019). Web.