Economic trends
The economy of Saudi Arabia is entirely based on oil. The policy of large-scale public works undertaken by the government, as well as foreign direct investment and the soundness of the banking and financial system have enabled the country to become the number one regional economy and one of the largest in the world. After the global economic recession of 2008-2009, the recovery in domestic demand in 2010 helped stabilize growth; this was consolidated in 2011 (6%).
The government's priority is to maintain growth and living standards, and create jobs in an uncertain global and regional environment marked by social unrest. The government is developing the oil and gas industry while seeking to reduce dependency of the kingdom on oil, diversifying its economic activities and developing mainly agriculture (notably through the purchase of land abroad to cultivate certain essential goods), food and industry. The private sector development is encouraged (especially in services), but in terms of the wave of social unrest which has recently swept through the region, social spending has been increased and jobs have been created in the public sector.
The standard of living is one of the highest in the region with over USD 20,000 GDP/inhabitant. The country is still marked by an unemployment rate of about 11% and high degree of social inequality.
Main branches of industry
Agriculture accounts for 3% of the GDP and employs 15% of the active population. It is not a very productive sector despite the huge state investments. Saudi Arabia imports most of its agricultural and food product requirements because of the geographical and climatic contraints (droughts). Water scarcity is a serious regional problem that the country is likely to face in the coming years, as growing cultivation of wheat presents a strong threat of water depletion.
The industrial sector represents two thirds of the GDP. It is dominated by non-manufacturing activities (oil drilling). The country has the largest oil reserves in the world and is also the largest producer and exporter of oil in the world. Oil accounts for more than 90% of exports and nearly 80% of government revenues. The share of non-oil industrial sector is now growing because of the investments of the Saudi state for economic diversification.
Lastly, services represent 22% of the GDP. This sector is mainly dominated by tourism, financial and insurance services and the banking sector. Tourism generates very large revenues (almost 4 milions of tourists per year), exclusively thanks to the pilgrimage to Mecca.
International trade
The foreign trade share in Saudi Arabia is nearly 95% of the GDP (average 2008-2010). The country's trade balance, although structurally in surplus, fluctuates according to the price of oil and the global demand.
Saudi Arabia's main export partners are the United States, China and Japan, followed by Germany and U.A.E., as well as the Southeast Asian countries. The country exports mainly crude oil (the black gold represents 90% of its exports), plastics, organic products and chemicals.
Its main import partners are the United States, Japan, China and Korea, followed by other Asian countries (India, Taiwan, Singapore). Saudi Arabia mainly imports vehicles, machinery, electrical equipment, iron, steel and food products.
In order to promote international trade, attract foreign investment and diversify the non-oil sectors, the government has announced plans to establish four "economic cities" in different regions of the country.
© Export Entreprises SA, all rights reserved.
Last updates: May 2012
