Saudi Arabia Economic Conditions

Saudi Arabia is a state of south-western Asia, which includes the central part of the Arabian Peninsula, of which it occupies the largest part of the territory . It borders to the North with Jordan, Iraq and Kuwait, to the SE with Qatar, United Arab Emirates and Oman, to the South with Yemen ; it faces the Red Sea to the W and the Persian Gulf to the NE.


South-western Asian state, entirely included in the Arabian Peninsula. According to, the birth rate remained high, albeit slightly decreasing (from 35 ‰ in 1995 to 29.6 ‰ in 2005); consequently the population continues to grow at a rapid pace (with an annual average of 2.7 % in the period 2000-2005). In the period 2000-2005, life expectancy at birth had reached 74 years, compared to 61 in 1980. The number of foreign workers, mainly from Middle and Far East countries, is always high; but the trend is towards a progressive use of the indigenous workforce, also because the high percentage of the population under the age of 15 (37 % in 2005) drives around 100,000 young people into the labor market every year, and the unemployment rate it has now reached 13 % of males of active age.

Over 87 % of the population is considered urban, and lives concentrated in the agglomeration of the capital Riyāḍ (4,087,150 residents in 2004), in the other cities (Jeddah 2.801.480, Mecca 1.294.100, Medina 918.890, Dammān 744.320, etc.) and in the oases.

The seventh five-year plan, launched by the government in August 2000 with the aim of strengthening and making the growth of the economy stable and constant, was based on two fundamental axes, namely maximum use of the local workforce and privatization of certain sectors of activities. This strategy implies on the one hand a radical diversification of the productive structure, and on the other the use of external capital to finance it. The situation of the early 21st century. however, oil extraction still prevails over all other activities (453,906,200 t in 2004), of which the country continues to be the world’s largest producer, which allows it to play a decisive role within OPEC (Organization of the Petroleum Exporting Countries). Good natural gas production (60,060 million m 3 in 2003), a sector in which significant foreign investments were made, materialized by the signing of important contracts with the United Kingdom, the Netherlands and France for gas exploration over an area of 200,000 km in the South of the country, as well as others for research and production with Russia, China and, with a European consortium led by Italy and Spain. As for the other productive sectors, agriculture occupies a marginal place, but, thanks to the considerable investments made by the government, the arable areas have increased, and Saudi Arabia has become self-sufficient in many food sectors. The manufacturing industry remains weak, and mostly linked to the oil sector (in 2003 it contributed just 10.1 % to the formation of GDP, occupying 7.6 % of the total workforce). On the other hand, services have grown significantly, with an average annual increase which between 1990 and 2003 was approximately 4.5 %, while their contribution to GDP formation was 40.8 %, with 74.4 % of the workforce employed. In 2003 there was a surplus of over $ 59.4 billion in the trade balance and $ 28 billion in payments.

The United States remains the main supplier of imports (14.5 % of the total) and the largest export market (18.7 %), despite a significant change in the kingdom’s foreign policy, and despite relations between Riyāḍÿ and Washington have gradually deteriorated significantly.

Economic conditions

The economy of the Saudi Arabia it is based on hydrocarbons, directly or not. The country would host a quarter of the world’s oil reserves: the resulting wealth is unbalanced, but has allowed a general and very clear improvement in the quality of life. After an initial period of rapid growth in crude oil production, the repeated world crises have brought about tensions and depressions, which, moreover, the government’s economic policy has tried to control; in particular, after the first Gulf War, the costs of which were largely borne by the author, the drop in the price of oil caused a sharp decline in average incomes, which then returned to satisfactory levels (over 13,500 dollars per capita in 2005). The oil refining capacity has risen to over 350 million tons per year, favoring the location of manufacturing complexes (iron and steel, mechanics) in newly built ‘industrial cities’; the stock exchange and some Saudi banks represent the main financial center of Western Asia. However, the social expenditure incurred by the state is very significant. Internal investments, guided (since 1971) by five-year plans, were aimed at strengthening infrastructures and services, then at the diversification of agricultural and industrial production, and finally at the financial service sector. Thus, the to. it has become an exporter of wheat as well as dates, increasing agricultural productivity. The cultivated area, just over 2% of the total, also produces coffee (Asir), vegetables and fruit. The natural pastures, very vast (40% of the territory) although not rich, favor the breeding of sheep (7 million in 2005), goats and camels, while cattle reach 350,000 units. Fishing is also progressing (64,750 t in 2003). Oil and its derivatives cover 86% of the value of exports; imports include industrial products and food products. The trade balance is, as a rule, extraordinarily active; the main partners are the USA, Japan, China and the EU countries (especially Germany, Italy, France).

Oil exploration began in 1935 in the coastal region of el-Ḥasā; after two years the deposit located in the area of ​​present-day Dhahran was discovered and in 1941 the larger one of Ghawar; since then new discoveries have been made, even in the submarine platform of the Persian Gulf. The extraction was nationalized between 1960 and 1979, and is now controlled by the publicly owned Saudi ARAMCO, but foreign companies continued to participate in technical assistance and distribution. After the record production of 495 million tons (1980), the Saudi Arabia still occupies (2005) the first place in the world ranking with 476 million t. Despite the fluctuation of production and related financial revenues, the Saudi Arabia maintained a moderate position within OPEC, covering an ever-increasing share of the sale of crude oil to Western countries and helping to alleviate market tensions. The export takes place both by sea, from terminals such as those of ad-Dammam and Ras Tanura (home to large refining plants), and by oil pipelines: one, with a distance of 1800 km, has reached the Lebanese port of Saida since 1950; the other (1981) joins Ghawar to Yanbu al-Bahr, on the Red Sea; in addition, a network of pipes serves the other refineries (including those in Bahrain). The production of natural gas is remarkable (64,000 million m 3 in 2004).

For internal communications, major improvements have been made to the road network (52,000 km asphalted), while only 1390 km of railways are in operation. Maritime and air transport have been developed: the main port is that of Gidda, with both a commercial and passenger function (pilgrims going to the holy cities), to which the oil terminals must be added; the main airports are those of Riyadh, Gidda, Medina and Dhahran, as well as numerous minor airports.

Saudi Arabia Economic Conditions

Saudi Arabia Economic Conditions
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