Area: 2,149,690 sq. km
GDP: USD 746.2bn (2014, est.)
Exports: UST 359.4nm (2014, est.)
Imports: USD 162.2bn (2014, est.)
Currency: Saudi-Riyal (SAR)
Exchange rate: 1 USD = 3.75 SAR (01/2016)
The Kingdom of Saudi Arabia can boast a strong economy, but it still continues to be highly dependent on its oil sector. It is the largest economy in the Middle East and the largest petroleum exporting in the world. In recent years it has experienced strong economic growth, although this dropped from 8.6% in 2011 to 5.1% in 2012. Estimates for 2013 predicted annual growth rate of 3.6%. The fact that petroleum sector accounts for about 80% of the budget revenues, 45% of the GDP and roughly 90% of its export earnings shows the extent to which the kingdom really is dependent on oral and emphasises the need for economic diversification.
Oil also plays an important role in calculating the state revenues, as they are heavily influenced by the oil prices. Saudi Arabia tends to calculate its revenues rather conservatively, which often results in a larger income than originally anticipated. According to either if estimates, General state revenues reached USD 335bn (SAR 1,255.6bn) and state expenditures USD 266bn (SAR 996.0bn) in 2013, which lets to a considerable budget surplus of EUR 50bn. Even if all prices drop again the foreign assets of about USD 700bn from the comp portable cushion.
Saudi Arabia’s efforts to diversify its economy it and focus mainly on power generation, telecommunications, natural gas exploration, and investments in renewable energy and the petrochemical sectors are designed to reduce dependency on oil. Also the country is improving in this field, diversification remains one of the main structural obstacles. Further investments are being made in infrastructural and social projects, as Riyadh struggles to reduce the unemployment rate of approximately 12% among its nationals. The Saudi youth in particular legs the education and technical skills needed in the private sector, and thus suffers from a lack of job opportunities. The rate of jobless youth Saudi citizens is therefore estimated at 30%. The Kingdom’s aim is to enhance the level of education among its youth, boosting it spending as a result to an estimated USD 54bn in 2013. In order to solve the problem, Saudi Arabia has also started replacing it approximately 7-8 million foreign workers – expatriates originating in particular from south Asia and lower income Arab countries, for example from Pakistan, Bangladesh and Yemen – with Saudi citizens which has led nearly 1,000,000 immigrant workers without legal residence or work permits to leave the country since November 2013. The economic aftermath of these measures is not yet easily predictable.
Saudi Arabia is the largest project market in the Gulf region, and large government investments in infrastructure, accommodation and education projects are generating a construction boom. The private sector is also growing, mainly focusing on hotel and office buildings. Investments in accommodation projects amounted to USD 26bn in 2012, while UST 60bn has been spent on office buildings and remaining infrastructure projects. The sector has experienced Constant growth in recent years, rising from 9.9% in 2011 to 10.3% in 2012.
In 2012, the inflow of foreign direct investments dropped to USD 12.2bn, its lowest level since 2005, yet overall investment increased to USD 199bn. The Kingdom’s industrial sector is undergoing a large-scale expansion and attempting to prologue the value chain of its petrochemical products. The USD 10bn refinery in Jubail started operations in 2013, and the new one is planned in Yanbu for 2014. The projects are part of the country’s plan to increase it or production capacity from 1.2m bpd to 3.3m bpd by 2016. Having focused mainly on mass chemical in the past, Saudi Arabia’s downstream industry will increasingly shift its emphasis to specialised chemical products in the future. Saudi Arabia is attempting to establish its own auto mobile and solar energy industries. As awareness of the limited supply of foreseeable resources grows, the kingdom is increasing its focus on renewable energy. It possesses one of the highest solar radiation rates worldwide and Goodwin conditions, especially along the coastline. With more than 350 days of sun you and wide areas of desert, estimates predict the potential of 2,200kWh solar energy per square metre/day and 50,000GW per year. These conditions make the country’s renewable energy sector highly promising. In order to establish a sonar energy industry, the kingdom is trying to attract foreign companies to the country by creating appealing investment conditions.
Minister of finance Abdullah Al-Assaf set a balanced state budget for 2014, calculating EUR 171bn of revenues. State expenditure is likely to increase by 4.3%, less than in the preceding years. The average economic growth should reach 4.4%.
Prospects in most of Saudi Arabia’s economic sectors are excellent. The construction sector will continue to grow due to lively estate investments and a long list of future projects. According to Saudi government plans, the total capacity of generating plans is to increase from 120GW to 130GW by 2032. Renewable energies are scheduled to produce about 54GW, why nuclear-power plans are to generate 17.6GW. The remaining 50-60GW will be generated by traditional oral and gas plants. A decision regarding plans for renewable energies in nuclear energy is currently in deliberation. The King Abdullah City for Anatomic and Renewable Energy (KA-CARE) was established in 2010 in order to foster the implementation of the sustainable strategy of generating power from the renewable energy.
By offering various incentives for foreign companies, the kingdom is continuing its efforts to attract foreign investments through the Saudi Arabian General Investment Authority (SAGIA) and a Saudi Industrial Property Authority (MODON). Foreign firms and joint ventures are nevertheless required to employ a specific quarter of Saudi nationals. Given that the Saudi government is willing to provide investment opportunities in infrastructure, water and energy supply, and education and healthcare projects, the country will remain of high interest to foreign companies in the coming years.
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