Saudi Arabia Structural reforms but a lower oil price

Saudi Arabia is making great progress on many fronts. Although it is still classified as an emerging economy, that does not seem appropriate on many levels. Three aspects of Saudi Arabia’s development are very encouraging.

First, it’s improved competitiveness. We emphasise the IMD’s World Competitiveness Ranking as the best measure of this. In 2024 (the latest report was published in June) Saudi Arabia jumped to 16th place globally and 4th within the G20 grouping.

Second, demographics are encouraging. In particular, the participation rate is improving, especially for women.

Third, the transition to a non-oil-based economy is progressing well. To be sure, some projects (Neom, notably) are highly ambitious. But that old saying about reaching for the stars seems apposite.

It’s these three aspects which explain the optimistic attitude evident among Saudi Arabia’s youthful population.

Oil price and Saudi break-even

Macroeconomic policy is sound. The Saudi real remains pegged to the US dollar at a rate of SAR3.75 to USD1.00, as it has been since 1986. The peg has come under pressure from time to time (during the Global Financial Crisis, particularly) but has proved resilient. The government’s fiscal deficit has widened out recently, but outstanding government debt is small relative to GDP. Saudi Arabia has substantial net foreign assets.