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Saudi Arabia Economy

Economy - overview:

Before the discovery of oil, the economy was dependent upon the pilgrimage to Makkah and Medina and on the export of dates (pictured). Saudi Arabia is still one of the world's leading producers of dates but today the economy is dominated by oil. Petroleum revenues have been used to create an infrastructure, which will in time transform Saudi Arabia into a diversified industrial state.

The Government, through the public sector, plays a major role in the Kingdom's industrial activity but, in recent years, the private sector has, with the Government's encouragement under the Kingdom's system of free enterprise, become increasingly involved in and responsible for industrial development and diversification.

Following the peak years of oil revenues in 1980/81 - 1982/83, it became necessary to undertake a very considerable downward adjustment to the government's level of expenditure. At the same time, the economy as a whole had to come to terms with more modest circumstances.

The most remarkable feature of this process is the relative ease with which both the government and the private sector came to terms with the new circumstances. This is not to say that the process has not been difficult, demanding, even painful. But it is true that a decline in revenues which could have destabilized other economies has been taken as an opportunity to consolidate past achievements and to engender a more commercially realistic and efficient approach to all types of venture.

Oil and petroleum products account for more than 90% of the country's income. At Jubail on the Arabian Gulf and Yanbu on the Red Sea, major new industrial centres have been built. The power to run them is derived from natural gas from the oil fields. In addition to oil and petroleum products, the country produces iron and steel, processed foodstuffs, cement and electrical equipment. Domestic water requirements are met by desalination plants.

Though natural water is in short supply, the government has funded agricultural development in order to reduce dependence upon imported foods and raise the standard of living in rural areas. There is also an expanding fishing industry.
Economy - overview

This is an oil-based economy with strong government controls over major economic activities. Saudi Arabia possesses 25% of the world's proven petroleum reserves, ranks as the largest exporter of petroleum, and plays a leading role in OPEC. The petroleum sector accounts for roughly 75% of budget revenues, 45% of GDP, and 90% of export earnings. About 40% of GDP comes from the private sector. Roughly five and a half million foreign workers play an important role in the Saudi economy, for example, in the oil and service sectors. The government in 1999 announced plans to begin privatizing the electricity companies, which follows the ongoing privatization of the telecommunications company. The government is encouraging private sector growth to lessen the kingdom's dependence on oil and increase employment opportunities for the swelling Saudi population. Priorities for government spending in the short term include additional funds for education and for the water and sewage systems. Economic reforms proceed cautiously because of deep-rooted political and social conservatism.

GDP (purchasing power parity):
$310.2 billion (2004 est.)

GDP - real growth rate:
5% (2004 est.)

GDP - per capita:
purchasing power parity - $12,000 (2004 est.)

GDP - composition by sector:
agriculture: 4.2%
industry: 67.2%
services: 28.6% (2004 est.)

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