Saudi is an oil producing country. Production and export of oil is the major economic activity of the country. The economy heavily relies on fiscal policies to stimulate the economy. The government focuses on spending on education and health care. There is also use of monetary policies. This focuses on ensuring that the interest rates at low levels. The nominal GDP of the country has been growing over the years. However, during the recession, the country recorded decline in GDP. The table below summarizes the nominal GDP of Saudi.
|Nominal GDP (SR billion)||1,552||1,676||2,075||1,641||1,976||2,511||2,727|
The graph below shows the trend of the nominal GDP from 2006 to 2012.
Despite the erratic trend in GDP, government revenue took the same trend over the same period. However, government expenditure has been increasing over the years as shown in the table below.
The trend of the values is shown in the graph below.
The external market contributed immensely to the increasing inflation in Saudi. Some of the sectors that recorded an increase in inflation are medical care, transport and telecommunication, home furniture, education and entertainment, and fabrics, clothing and footwear. The overall inflation of the country increased sharply until 2008. Thereafter, it declined. The table below shows the rate of inflation of the years.
The graph below shows trend of the values of the year
Further, the population of the economy has been increasing over the years. However, the unemployment rate has been erratic over the years. Generally, the unemployment rate has been relatively lower with values less than 13% during the period. The table below summarizes the statistics from 2006 to 2012.
The graph below shows the trend of the values.
The export /import factor
As mentioned above, oil makes up about 85 to 90% of the exports thus, a decline in production of oil and prices affects the GDP. The economy needs to diversify so as to increase the sources of revenue. This helps in mitigating the risks arising using one source. Further, petrochemical and plastic products make about 6% of the export. The import comprises of household goods, infrastructure, vehicles, and electronics. There should be establishment of local industries so as to minimize expenditure on imports for basic commodities (Mankiw, 2011; Parkin, 2007). The table below summaries the statistics of external trade indicators.
|Total export revenue ($ billion)||210.9||233.1||313.4||192.2||251.0||364.6||396.0|
In 2013, the revenue from production and sale of oil is likely to drop. This can be attributed to low production and low prices. The estimates for 2013 are shown below.
|Total export revenue ($ billion)||332.9|
The table below shows the trend of the values.
Risks that can impact on revenue of the economy
The main risk facing the economy of Saudi is the factors arising from the external environment. An example is the recession experienced from 2009 to 2010. This slowed down the export of oil. The second risk factor the economy faces is the geopolitical tensions. This similarly affects the export business. Thirdly, a decline in international prices of oil leads to decline in the revenue received by the country. It leads to lower GDP (Bade & Parkin, 2009).
Bade, R. & Parkin, M. (2009). Essential Foundations of Economics. United States: Pearson Education
Mankiw, G. (2011). Principles of Economics. USA: Cengage Learning.
Parkin, M. (2007). Economics. United States: Pearson Addison-Wesley.