What Will the Future of Saudi Economy Look Like?

Published September 23rd, 2021 - 07:00 GMT
Saudi celebrates 91st national day
Saudi Arabia is celebrating the 91st national day on the 23rd of September. (Shutterstock: badr_a_alfarsi)

The Saudi economy continues to be the biggest of all Arab countries in the region. For decades, the kingdom has relied heavily on the oil industry to create and maintain a strong stance on the global record, but drastic changes have been emerging in recent years.

It is no secret that the Saudi vision for its economy has changed following a series of financial shocks that hit global markets over the last two decades. Whether we are talking about the 2008 economic crash, the decreasing global demand for fossil fuel as a result of worsening climate change, or the fluctuating oil market that lived through grim times during the first months of COVID19 lockdowns.

Consequently, Saudi Arabia and other countries in the region have realized the need for more diverse sources of income, ones where the oil industry is not the primary source of funds.

Future plans that have been announced over the years have started with a special focus on making the country more open towards tourists from around the world, in order for the Saudi economy to generate profit in aviation, hotels and hospitability, in addition to the entertainment industry.

Briefly before COVID19 hit the world, Saudi Arabia was opening movie theaters, new museums and art galleries, in addition to introducing international artists to huge concerts and major cultural festivals. The country was even planning to open its first opera house.

While most of these changes have been taking place within the framework of the Saudi 2030 Vision that aims to reduce Saudi Arabia's dependence on oil and carrying out a major overhaul of different sectors so they are up-to-date with the needs of the current era, Saudi Arabia has also revealed a number of unconventional projects that when completed, will have a long-term transformative impact on its economy as well as that of the region.

In 2017, Saudi officials uncovered plans to build the NEOM city by the Red Sea. The project that is estimated to cost around $500 billion aims to make NEMO the new business hub of the Middle East, taking advantage of its unique location and warm weather all year long. Yet, NEOM will be a green, sustainable, and digital modern city that will use exclusively operate on renewable energy sources, presenting the world with a futuristic vision of a world that avoids the long-feared repercussions of climate change. This project is expected to create more than 250,000 jobs.

Moreover, the Crown Prince of Saudi Arabia, Mohammad bin Salman, has also announced plans for another ambitious project called "The Line". The city has been expected to cost between $100-$200 billion by the time it is built.

Based on MBS's presentation last January, the Line has been perceived as "a revolution in urban living at the project, and a blueprint for how people and planet can co-exist in harmony", considering its vision for a care-less city across a 170km belt that is directly connected to nature. The Line can generate more than 380,000 jobs in addition to nearly SR180 billion ($48 billion) to domestic GDP by 2030.

While Saudi Arabia suffered acute consequences following the spread of COVID19 in the early months of 2020, which disrupted the country's economic plans for a while, the country has been amongst the first in the world to roll out vaccination programs offered to both citizens and expat residents free-of-charge. So far, more than 18 million people have been fully vaccinated, which makes up around 52.6% of the population.

This quick response to the pandemic, coupled with multiple government programs to support individuals, investors, and institutions through the crisis have enabled the Saudi economy to report growth signs last August. In the Q2 of 2021, Saudi Arabia's economy grew by more than 10% in the non-oil sectors.

Last week, MBS launched "The Human Capability Development Program", which aims to enhance the professional skills of Saudi citizens so they have better chances competing for local and global labor markets.

It can be hard to imagine a non-oil-based Saudi economy for the time being, but national strategies underway suggest that the Saudi reality will soon feature revolutionary changes that will not only have a major impact on the local level but will be felt across the region. 

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