Saudi Arabia

Almost all Gulf Cooperation Council (GCC) countries devote a large share of their Gross Domestic Product (GDP) to military spending. Saudi Arabia is no exception. Saudi Arabia’s spending on defence has increased significantly in the last two decades and as a result this GCC country has developed one of the world’s most advanced military arsenals, with the majority of related equipment being supplied by the US, France and the UK. According to data provided by the Ministry of Finance, in 2016, Saudi Arabia was to allocate the biggest amount of the national budget, on “Military and Security Services”, for a total of 213.4 billion Saudi Arabian Riyal (SR) (approximately 56.9 billion US dollars). Education and training with 191.7 billion SR (approximately 51.1 billion US dollars), and Health & Social Development with 104.9 billion SR (approximately 28 billion US dollars) were to follow.

In the beginning of the 1920’s, Saudi Arabia was a poor country, the economy of which was mainly based on agriculture. This situation dramatically changed in 1938, when oil was first discovered in the country. In 1960, Saudi Arabia was one of the founding Members of OPEC, the objective of which was to co-ordinate and unify petroleum policies among member countries, in order to secure fair and relatively stable prices for petroleum producers.

Since then, the country’s fate was closely connected with the fluctuation in oil prices. When the oil price fell in the mid-80s, the country built-up a considerable overseas debt, while when in the mid-2000s oil prices recovered, the country posted budget surpluses and boosted spending.

In order to avert such drastic swings in the country’s economic results in future, Saudi authorities have been investing petroleum related income, with the aim to diversify the local economy. In 1970, the First Development Plan of the country was introduced, with the purpose of providing a ‘guidance’ on how the aforementioned goals would be achieved. Since then, a series of five-year development plans have been issued.
The first phase of this process aimed to establish an infrastructure that could support a modern economic base. The next step aimed to create a workforce able to help bring about the planned economic transformation. Then, the focus shifted to the creation of a diversified economy that could expand to sectors other than oil and gas. Finally, the last few 5-year development plans, placed emphasis in strengthening and growing the private sector.

Over a relatively short period of time, Saudi Arabia has managed to achieve a small economic miracle. Per-capita income averaged an annual growth rate of 0.87% during the period 1971-2004, despite a parallel high population growth rate of 3.9%, while, GDP increased on average by 5.4% in the period 2006-2014.

Oil has traditionally dominated Saudi exports. Nevertheless, the country’s exports’ structure is progressively changing. According to official estimates, this trend is going to further intensify and as a result it is expected that oil exports will fall to 36.7% of the total exports by the country in 2024 (compared to 71.7% in 2004). More on that, exports of services are expected to grow at an average annual rate of 7.3%, during the period 2004-2024, while their share in overall exports is expected to increase from 7.6% in 2004, to about 9.6% in 2024.