The economy of Saudi Arabia grew during last decade, primarily thanks to rising oil prices. Now a transformation is needed in order to make the national economy more productive. The country needs to attract investment. There is a new report by the McKinsey company on the topic. Some core insights were published on its website.
The oil price boom between the years 2003 and 2013 made Saudi Arabia the 19th-largest economy in the world. Its GDP doubled, household income increased by 75 % and almost 2 million new jobs were created. The government invested in education, health and infrastructure. The government also stockpiled considerable reserves, which were almost equal to the country’s GDP in 2014.
Oil revenues and public spending cannot secure further growth
By 2030 there will be many more Saudis of working age. At the same time, the global energy market is changing and shifting. Even if the government restricts immigration, unemployment is going to rise rapidly, according to estimates by McKinsey. Household income will fall and the fiscal position of government will begin to worsen sharply. A more market-based approach is needed to replace the government's economic model. New revenue sources, higher domestic energy prices and perhaps taxes, can help to maintain fiscal sustainability.
A positive scenario
A productivity-led economic transformation could ensure a further doubling of the country's GDP. Furthermore, six million new jobs could be created by the year 2030. Investment would have to be high, but it would pay off. The main sectors where the bulk of economic growth can be achieved are mining and metals, petrochemicals, manufacturing, retail, tourism, healthcare, finance and construction.
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