Saudi Arabia

According to the December 2018 report by Stockholm International Peace and Research Institute (SIPRI), Saudi Arabia is the world’s third-largest military spender behind the USA and China, the largest spender on arms in the Middle East, and the largest military spender per capita. According to the General Authority of Statistics-GaStat the Military spending of the Saudi Arabian State Budget in 2019 was SAR 198 Billion (US$52.8 Billion) representing 18.89% of the State Budget, reduced by -12.22% compared to 2018. The Security spending in 2019 was SAR 104 Billion (US$27.73 Billion) reduced by 3% compared to 2018.

Traditionally, Saudi Arabia sided with the Western countries and became one of the most important importer of western weapon systems. The biggest arms suppliers of Saudi Arabia from 1998-2017 are: USA (61%), Britain (23%), France (3.6%), Spain (2.4%), Switzerland and Germany (each 1.8%), Italy (1.5%), Canada (1.4%) and Turkey (1.3%), Sweden (1.1%), and the Netherlands (0.5%).

Economy

The Kingdom of Saudi Arabia is the largest economy in the Middle East in terms of Gross Domestic Product (GDP) which reached SAR 2,631 Billion or US$701.624 Billion in 2018 at Constant Prices (2010=100) increased by 2.43% compared to 2017. (SAR 2,949 Billion or US$786.521 Billion in 2018 at Current Prices, increased by 14.22% compared to 2017).  Because of the dependency of the Saudi economy on the energy industry, the GDP of the country fluctuated the last eight years, due to the continues change of the oil prices.

Although in 2011 the Saudi GDP at Constant Prices (2010=100) increased by 10%, the following years the growth rates of the Saudi economy fluctuated from 5.41% in 2012, to 2.7% in 2013, increased by 3.65% in 2014, by 4.11% in 2015, and by 1.67% in 2016, reduced by -0.74% in 2017, and finally increased by 2.43% in 2018. (In 2011 the GDP (at Current Prices) was increased by 27.08%, the following years fluctuated from 9.64% in 2012, to 1.45% in 2013, and 1.30% in 2014, reduced further by -13.50% in 2015, by -1.43% in 2016, increased by 6.77% in 2017 and by 14.22% in 2018).

According to the official data of OPEC, in 2018 the Kingdom of Saudi Arabia had proven crude oil reserves of 267.026 Billion barrels (including 2.5 Billion barrels in the Saudi–Kuwaiti neutral zone) the 2nd largest in the world and represent approximately 20% of the world's total conventional oil reserves. The country has also 9.069 Billion Cubic Meters of proven natural gas reserves, the 5th largest proven natural gas reserves in the world.

According to the “Annual Statistical Review of BP” the proven crude oil reserves and natural gas liquids of the Kingdom of Saudi Arabia in 2018 were estimated to 297.7 Billion barrels, since Saudi ARAMCO decided to classify its natural gas liquids, or "wet gas" as liquid oil. The petroleum sector accounted for 67.8% of the Kingdom’s revenues in 2019 and in 2018 and 63% in 2017.

Furthermore, the crude petroleum sector accounted for 78.7% of the value of total exports of the country in 2018, 76.7% in 2017, 74.2% in 2016, 75.1% in 2015, 83.1% in 2014, 85.6% in 2013, 86.9% in 2012 and 87.1% in 2011. The crude oil petroleum and natural gas sector accounted for the 39.4% of the national GDP in Constant Prices in 2018 and 29.50% of the GDP in Current Prices in 2018.

The leading national company in the energy field in Saudi Arabia is the state-owned Saudi ARAMCO. The total value of the assets of the company on the 31st of December of 2019 was SAR 1,494,126,000,000 (US$561,701,503,759.39) The company manages 130 oil and gas fields in Saudi Arabia and in 2018 the company had revenue of US$355.9 Billion and had net income of US$111.1 Billion.

ARAMCO operates 11 refineries of the Kingdom exclusively or on joint ventures.

These are:

  • Ras Tanura Saudi Aramco (550,000 b/d),
  • SATORP Jubail Saudi Aramco, Total S.A. (400,000 b/d),
  • Rabigh Saudi Aramco (400,000 b/d),
  • SAMREF Yanbu Saudi Aramco, Mobil (400,000 b/d),
  • YASREF Yanbu Saudi Aramco (400,000 b/d),
  • Al Jubail Saudi Aramco, Shell (SASREF) (310,000 b/d),
  • Yanbu Saudi Aramco (235,000 b/d),
  • Riyadh Saudi Aramco (124,000 b/d),
  • Jeddah Saudi Aramco (88,000 b/d),
  • Saudi Aramco Base Oil Co. (Luberef),
  • Jazan Refinery and terminal projects (JRTP) (400,000 bl/d)

According to OPEC the daily crude oil production of Saudi Arabia was 10,317,300 barrels in 2018 and the marketed production of natural gas was 118,000 mcm (million cubic meters).  The refinery capacity of Saudi Arabia in 2018 was 2,856,000 bl/d and the output of petroleum products was 2,817,300 bl/d.  The Kingdom exports 7,371,500 bl/d of crude oil and 1,971,200 bl/d of petroleum products.

According to the Saudi “General Authority of Statistics-GaStat”, the value of the oil exports in 2018 was SAR 868.44 Billion (US$326.48 Billion) and SAR 638.40 Billion (US$240 Billion) in 2017, while the value of the non-oil exports in 2018 and 2017 was SAR 235.45 Billion (US$88.51 Billion) and SAR 193.47 Billion (US$72.73 Billion) respectively.  In total in 2018 Saudi Arabia exported oil and non-oil products valued SAR 1,103.9 Billion (US$294.37 Billion) and SAR 831.88 Billion (US$211.83 Billion) in 2017.

The trade balance of the Kingdom throughout the decade 2009-2018 has been generally positive due to the huge energy exports, although in 2009, 2015 and 2016 a dramatic reduction of the exports was recorded.

Exports Imports and Trade Balance (Millions of Ryals)

Year

Exports

Imports

Trade Balance

2009

721,109

358,290

362,819

2010

941,785

400,736

541,050

2011

1,337,620

493,449

874,171

2012

1,456,502

583,473

873,029

2013

1,409,523

630,582

778,941

2014

1,284,122

651,876

632,246

2015

763,313

655,033

108,280

2016

688,423

525,636

162,787

2017

831,881

504,447

327,435

2018

1,103,900

513,993

589,908

The global financial crisis of 2008 knocked down the oil exports of Saudi Arabia in 2009, resulting to a reduction of the exports by 38.7% and the reduction of the oil exports by 42% compare to 2008. The following years, the Saudi exports fluctuated proving the dependency of the Saudi economy to the global oil prices. The worst year for the Saudi oil exports was in 2016, when their value dropped to SAR 510.72 Billion (US$192 Billion) from SAR 573.41 Billion (US$215.56 Billion) in 2015 and SAR 1,067.09 Billion (US$401.16 Billion) in 2014.

Although the Saudi oil exports experienced a continues increase the years that followed, SAR 638.4 Billion (US$240 Billion) in 2017 and SAR 868.44 Billion (US$326.48 Billion) in 2018, they never reached the 2011 or 2012 or even the 2014 high records.  Another interesting issue about the Saudi exports is the fact that even the non-oil exports include many products that are related to the oil industry.  According to the GaStat the exports of products such as plastics, rubber, chemical or allied industries valued SAR 155.12 Billion (US$58.18 Billion) in 2018 and SAR 118.41 Billion (US$44.41 Billion) in 2017.

These categories of products represent the 65.88% and the 61.2% of the total value of the non-oil Saudi exports for the years 2018 and 2017 respectively. Most of the oil exports of Saudi Arabia go to the Chinese, Japanese, Indian, South Korean and U.S.A markets. These countries are the most important partners for the Saudi export.

According to the Saudi GaStat, the Top 10 partner countries for exports in 2018 were:

  • China (SAR 146.7 Billion – US$39.12 Billion),
  • Japan (SAR 123.6 Billion – US$32.97 Billion),
  • India (SAR 98.68 Billion – US$26.31 Billion),
  • South Korea (SAR 95.6 Billion – US$26 Billion),
  • USA (SAR 68.8 Billion – US$25.49 Billion),
  • UAE (SAR 62 Billion – US$16.55 Billion),
  • Singapore (SAR 43.59 Billion – US$11.62 Billion),
  • Netherlands (SAR 35.5 Billion – US$9.46 Billion),
  • Belgium (SAR 29.28 Billion – US$7.81 Billion),
  • Taiwan (SAR 27.88 Billion – US$7.43 Billion).

The exports of Saudi Arabia to those countries amounted SAR 760.6 Billion (US$202.82 Billion) accounting for 68.9% of the total exports.

Regarding the imports of the Kingdom, the Top 10 partner countries for imports in 2018 were:

  • China (SAR 81.8 Billion – US$21.8 Billion),
  • USA (SAR 70.6 Billion - US$18.8 Billion),
  • UAE (SAR 43.4 Billion – US$11.58 Billion),
  • Germany (SAR 28.3 Billion – US$7.54 Billion),
  • India (SAR 21.3 Billion – US$5.68 Billion),
  • Japan (SAR 20.59 Billion – 5.49 Billion),
  • France (19.77 Billion – US$5.27 Billion),
  • South Korea (SAR 16.19 Billion – US$4.31 Billion)
  • Italy (SAR 16 Billion – US$4.26 Billion)
  • UK (SAR 11.86 Billion – US$3.16 Billion)

The imports of Saudi Arabia from those countries amounted SAR 330.1 Billion (US$88 Billion) accounting for 64.2% of the total imports.

Regarding the sectors of the economy that in 2018 had significant contribution to the national Saudi GDP (at Constant Prices 2010=100, SAR 2,631.09 Billion/US$701.624 Billion) these are (Preliminary Data):

  • Agriculture forestry and fishing SAR 60.6 Billion (2.3% of the GDP at Constant Prices 2010=100)
  • Crude Petroleum, Natural Gas and other SAR 1,046.91 Billion (39.79% of the GDP at Constant Prices 2010=100)
  • Manufacturing (Petroleum Refining, others) SAR 318.52 Billion (12.10% of the GDP at Constant Prices 2010=100)
  • Electricity Gas and Water SAR 34.77 Billion (1.32% of the GDP at Constant Prices 2010=100)
  • Construction SAR 113.17 Billion (4.30% of the GDP at Constant Prices 2010=100)
  • Wholesale and Retail Trade Restaurants and Hotels SAR 231.56 Billion (8.8% of the GDP at Constant Prices 2010=100)
  • Transport Storage and Communication SAR 154.94 Billion (5.89% of the GDP at Constant Prices 2010=100)
  • Finance Insurance Real Estate and Business Services SAR 257.69 Billion (9.79% of the GDP at Constant Prices 2010=100)
  • Community Social and Personal Services SAR 52.91 Billion (2.01% of the GDP at Constant Prices 2010=100)
  • Imputed Bank Services Charge SAR 21.23 Billion (0.81% of the GDP at Constant Prices 2010=100)
  • Government Services SAR 366.16 Billion (13.9% of the GDP at Constant Prices 2010=100)
  • Import Duties SAR 15.02 Billion (0.73% of the GDP at Constant Prices 2010=100)

State Budget, Deficit, Debt

One of the most interesting characteristics of the annual State Budget of the Kingdom of Saudi Arabia is the continues tendency the Actual Expenditure to exceed the Approved Budget maintaining a small but considerable Budget Deficit and National Debt.  According to the Saudi Ministry of Finance the period 2010-2018 with the exemption of 2016 and 2019 the Actual Expenditure was more than the Approved by the Government State Budget.

In 2010 the actual expenditure exceeded the approved budget by 21%, in 2011 by 43%, in 2012 by 33%, in 2013 by 21%, in 2014 by 33%, in 2015 by 16% in 2017 by 4% and in 2018 by 10%. According to the data of the Saudi Ministry of Finance, the State revenues for 2016 reached SAR 519 Billion and the real expenditure was SAR 830 Billion (SAR 311 Billion deficit). For the year 2017 the State revenues reached SAR 692 Billion and the real State expenditure was SAR 930 (SAR 238 Billion deficit).

For 2018 the Ministry of Finance estimated that the State revenues would be SAR 895 Billion and the revised State expenditure SAR 1,030 Billion (SAR 136 Billion deficit), although eventually the actual revenues reached SAR 906 Billion and the expenditure SAR 1,079 Billion (SAR 173 Billion deficit). For 2019 the Government announced initial estimated State revenues SAR 975 Billion, although later the revenues estimated to reach about SAR 917 Billion, due to the decline of oil revenues.

The State expenditure was estimated to reach about SAR 1,106 Billion (SAR 131 Billion deficit), although later the expenditure estimated to reach about SAR 1,048 Billion (SAR 131 Billion deficit). The Budget deficit in 2016 was 12.9% of the GDP, in 2017 was 9.3% of the GDP, in 2018 was 5.9% of the GDP and in 2019 estimated to be 4.2% of the GDP although it seems that it will eventually be increased to 4.7% of the GDP.

On the other hand, the Saudi State Debt in 2016 reached SAR 317 Billion (13.1% of the GDP), in 2017 it reached SAR 443 Billion (17.2% of the GDP), in 2018 it was SAR 560 Billion (19.1% of the GDP) and in 2019 is estimated to be SAR 678 Billion (21.7% of the GDP) although it seems that it will eventually be increased to 24% of the GDP.

Regarding the distribution of the State Expenditure in 2018 from the total approved amount was SAR 1,030 Billion, although eventually about SAR 1,079 Billion was spent:

  • Public Administration, eventually received SAR 31 Billion (approved SAR 27 Billion, initially approved SAR 26 Billion),
  • Military eventually, eventually received SAR 242 Billion (approved SAR 218 Billion, initially approved SAR 210),
  • Security and Regional Administration, eventually received SAR 13 Billion (approved SAR 106 Billion, initially approved SAR 101 Billion),
  • Municipal Services, eventually received SAR 46 Billion (approved SAR 54 Billion, initially approved SAR 53 Billion),
  • Education, eventually received SAR 209 Billion (approved SAR 205 Billion, initially approved SAR 192 Billion),
  • Health and Social Development, eventually received SAR 175 Billion (approved SAR 159 Billion, initially approved SAR 147 Billion),
  • Economic Resources, eventually received SAR 105 Billion (approved SAR 106 Billion, initially approved SAR 105 Billion),
  • Infrastructure and Transportation, eventually received SAR 49 Billion (approved SAR 55 Billion, initially approved SAR 54 Billion), and finally
  • General Items, eventually received SAR 108 Billion (approved SAR 100 Billion, initially approved SAR 89 Billion).

For 2019 the Saudi Government had approved to spend SAR 1,106 Billion, but throughout the year the expenditure was estimated eventually to reach SAR 1,048 Billion and was distributed as follows:

  • Public Administration, estimated expenditure SAR 29 Billion (approved SAR 27.65 Billion),
  • Military, estimated expenditure SAR 198 Billion (approved SAR 191.34 Billion),
  • Security and Regional Administration, estimated expenditure SAR 104 Billion (approved SAR 102.86 Billion),
  • Municipal Services, estimated expenditure SAR 59 Billion (approved SAR 61.94 Billion),
  • Education, estimated expenditure SAR 202 Billion (approved SAR 193.55 Billion),
  • Health and Social Development, estimated expenditure SAR 174 Billion (approved SAR 172.54 Billion),
  • Economic Resources, estimated expenditure SAR 99 Billion (approved SAR 130.5 Billion),
  • Infrastructure and Transportation, estimated expenditure SAR 62 Billion (approved SAR 69.7 Billion), and finally
  • General Items, estimated expenditure SAR 121 Billion (approved SAR 155.95 Billion).

Due to political factors and lower oil prices the Foreign Direct Investment (FDI) flow to Saudi Arabia the period 2016-2017 had a downward trend but recovered in 2018 because of the fact, that the country opened four more industries to FDI.  These are recruitment and employment services, real estate brokerage, audiovisual and media services and land transport services. Furthermore, the Saudi Government initiated a large privatization programme. According to Santander Trade, the inward flow of FDI in 2016 was US$7,453 Billion, in 2017 the inward flow was US$1,419 Billion and in 2018 it reached US$3,209 Billion.

The FDI inflows to Saudi Arabia by country in 2017 it was UAE 21.9%, USA 20.3%, France 9.1% Singapore 6.9%, Japan 5.6%, Kuwait 4.6%, and Malaysia 4.6%. The main invested sectors of the FDI in 2017 were: Chemical Industry 30.8%, Real Estate 27.7%, Coal, Oil & Gas extraction 7.9%, Automotive industry 7.1%, Hotels and tourism 6.9%, Plastics 5%, Industrial machinery 2.4%.

According to the law on FDI, foreigners are allowed to invest in Saudi Arabia in all sectors of the economy except for specific activities on a Blacklist which includes the oil and mining sector, some services e.t.c. The foreign investors are no longer required to have local partners in number of several sectors of the Saudi economy and may have the right to own property for company activities.

An Investment Services Center was established by the Saudi Arabian General Investment Authority (SAGIA) in order to facilitate new direct investments in the Kingdom.The new government policy for the encouragement of FDI and the privatization program intends among others to create new quality jobs for the young population of the country. The Saudi Government tries to alter the existing status quo in the labor market which is dominated by the foreign workers.  According to the GaStat, in total 9.9 million foreign citizens were working in the Kingdom at the 2nd Quarter of 2018 compare to the 3.1 million Saudi citizens. The creation of new jobs for Saudi citizens, the famous “Saudization” policy that started in 2011, has not achieved spectacular results as it was expected.

Although the number of the foreign worker has been reduced the last years due to the imposing of expat levies on non-Saudis and strict job restrictions imposed by the Government, according to Reuters economists only 30-40% of working age Saudis hold jobs or actively seek work while the unemployment rate is about 6% the last three years.

“Saudi Arabia’s Vision 2030”

The “Saudi Arabia’s Vision 2030” was initiated by the Government in 2016 and represented the determination of the Crown Prince Mohammed bin Salman bin Abdulaziz al-Saud, to modernize the country, develop new parts of the economy, create new quality jobs, wean it off its dependence on oil, without altering the traditions and the Islamic identity of the country. The “Saudi Arabia’s Vision 2030” program has 96 strategic objectives. In order to achieve these objectives, 13 programs called “Vision Realization Programs (VRP)” were established.

The 13 VRP programs are:

  • Public Investment Fund program
  • Privatization program
  • National companies’ promotion program
  • National industrial development and logistics program
  • Strategic partnership program
  • Hajj and Omrah program
  • Human capital development program
  • National character enrichment program
  • Quality of life program
  • Financial sector development program
  • Housing program
  • Fiscal balance program
  • National transformation program

The “Saudi Arabia’s Vision 2030” program was developed by the Council of Economic and Development Affairs (CEDA), which is chaired by Deputy Prime Minister Crown Prince Mohammed bin Salman and three levels ensure the application of the program. The overall roles for the directions and the decision making of the “Saudi Arabia’s Vision 2030” lie within a Council of Ministers and CEDA. The Director of CEDA and the managers of the 13 VRP ensure the following up of the program on the 5-year level, while each entity concerned in the program is individually responsible for its annual budget and objectives.

The Coronavirus pandemic and the collapse of the energy prices forced the Government of Saudi Arabia to triple the value of the VAT from 5% to 15% as part of austerity measures to support its coronavirus-hit economy. In addition to that the Government suspended its cost of living allowance to shore up state finances. The allowance of SAR 1,000 ($267; 245 Euros) per month to state employees was introduced in 2018, in order to help offset increased financial burdens including VAT and a then rise in the price of petrol. The measures to fight the impact of coronavirus were expected to slow the pace and scale of the economic reforms launched by Crown Price Mohammed bin Salman.

Citizen’s Account Program

The Citizen’s Account Program started in December 2017 and includes monthly payments from the state to the citizens of the Kingdom as a response to the increase of the costs of electricity and gasoline, as well as the impose of VAT on many consumer products and services.The increase of the cost electricity and gasoline and the impose of VAT, is part of the Government reform program to reduce the country's dependency on oil revenues. The target of the Citizen’s Account Program is to avoid higher rates of poverty and since its implementation 3.7 million Saudi households had registered, representing 13 million people, or 62.6% of the Saudi population.