The Saudi Arabian Quandary: The Economy's Inability to Sustain Growth
Abstract
Before the recent surge in oil prices, the Saudi Arabian economy was showing signs of slow-down and stagnation. The economy appeared incapable of sustaining growth without a rising infusion of oil revenues. The purpose of this paper is to identify the main factors responsible for the ongoing economic deterioration. An analysis of government expenditures suggests that a major factor responsible for the country's economic decline is deterioration in the links between government expenditures and the non-oil sectors of the economy. In large part, the declining effectiveness of government expenditures in stimulating private sector activity can be attributed to the high priority the government gives to social expenditures and defense. The implications are that if the economy is to achieve self-sustained growth independent of developments in the oil sector, government expenditures will have to be refocused on activities that directly support private sector investment. The welfare state will have to be scaled back and a higher priority given to economic allocations. In addition, greater emphasis must be placed on efficiency and productivity in government activities. Saudi Arabia's problems have been decades in the making and certainly will not be solved in the short or perhaps even medium term. The purpose of this article is to attempt to identify the main factors responsible for the on-going economic deterioration. Have fundamental changes taken place in the economy, perhaps since 1980, to cause the decline in non-oil economic growth? If so, what are they, and what are the implications for the future?
Document Details
- Document Type
- Technical Report
- Publication Date
- Jan 01, 2004
- Accession Number
- ADA521190
Entities
People
- Robert E. Looney
Organizations
- Naval Postgraduate School