Saudi Arabia: not really an emerging economy

Sep 10

2 min read

Emerging Economy or Global Competitor?

Saudi Arabia is making great strides in various sectors. Although it is still classified as an emerging economy, this designation seems increasingly outdated. Three key aspects of Saudi Arabia’s development are particularly encouraging.

Improved Competitiveness

First, improved competitiveness. The IMD’s World Competitiveness Ranking puts Saudi Arabia 3rd out of the G20 economies, after the US and China. This is a remarkable improvement in a short space of time. It ranks 13th out of 70 countries in the world - rising from 24th just four years ago. It scores well in business efficiency. basic infrastructure and the management of public finances.

Demographic Trends

Second, the demographic landscape is shifting positively. Notably, the participation rate in the workforce is on the rise, particularly among women. This change is vital for the economy, as it harnesses untapped potential and promotes inclusivity.

Transition to a Non-Oil-Based Economy

Third, the transition to a non-oil-based economy is underway. While some projects, like Neom, may appear overly ambitious, they signify a broader vision for economic diversification. This shift is essential for long-term sustainability and resilience.

Impact of Geopolitical Events

One immediate consequence of the Iran war is higher, albeit volatile, oil prices. At, once again around US$100 per barrel in September, these now surpass Saudi Arabia's fiscal breakeven price. However, the ongoing Gulf conflict may hinder inward investment and diminish the country’s appeal as a tourist destination.

Macroeconomic Stability

Macroeconomic policy remains sound. The Saudi riyal is pegged to the US dollar at a rate of SAR3.75 to USD1.00, a stable arrangement since 1986. Although the peg has faced pressure during events like the Global Financial Crisis, it has demonstrated resilience. Recently, the government’s fiscal deficit has widened, yet outstanding government debt remains relatively small compared to GDP. Furthermore, Saudi Arabia boasts substantial net foreign assets.

Conclusion

With improved competitiveness, positive demographic trends and a commitment to diversifying its economy, the nation is positioning itself as a significant force in the G20.