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Long Term Economic Growth in Oil-Rich Saudi Arabia: What is the role for non-oil sectors?

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  • A Alodadi
  • J Benhin

Abstract

As a depletable resource, oil is a useful source of economic growth, but may not be relied upon for long-term sustainable development. Diversification from oil is needed to achieve this. This paper examines the most important non-oil determinants of growth in the Saudi economy between 1970 and 2011, using the Johansen approach and error correction modelling, to study the relationship between all variables, both long and short-run. It focuses on the role of non-oil sectors, given the government's determination to reduce dependence on oil income. The study uses exports, government spending, private and public investment, religious tourism, labour and capital as independent variables, while economic growth is addressed as the dependent variable. Empirical results show that all variables are important in the growth of the Saudi economy except non-oil exports, which do not have a significant effect on economic growth. Religious tourism's role was not found to be significant in the process of economic growth, when the economy as a whole was taken into consideration. Nonetheless, when isolating the non-oil sectors, the effect of religious tourism had a greater influence on economic growth. Concrete evidence also exists as to the importance of the role of an additional variable - government spending - in enhancing economic growth.

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  • A Alodadi & J Benhin, 2015. "Long Term Economic Growth in Oil-Rich Saudi Arabia: What is the role for non-oil sectors?," Economic Issues Journal Articles, Economic Issues, vol. 20(1), pages 109-130, March.
    • Handle: RePEc:eis:articl:115alodadi
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    2. Mohammad Imdadul Haque, 2019. "Growth Accounting for Saudi Arabia," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 9(6), pages 691-701, June.
    3. Badreldin Mohamed Ahmed Abdulrahman, 2021. "Oil and Non-oil Export and its Impact on Economic Performance in Saudi Arabia," International Journal of Energy Economics and Policy, Econjournals, vol. 11(1), pages 88-92.
    4. Said M. Alkhatib, 2016. "The dynamic response patterns of output to credit: the case of Saudi Arabia," International Journal of Economics and Business Research, Inderscience Enterprises Ltd, vol. 11(1), pages 11-25.
    5. Anis Ali, 2021. "Do Oil Prices Govern GDP and Public Spending Avenues in Saudi Arabia? Sensitivity and Trend Analysis," International Journal of Energy Economics and Policy, Econjournals, vol. 11(2), pages 104-109.
    6. Nasir, Muhammad Ali & Al-Emadi, Ahmed Abdulsalam & Shahbaz, Muhammad & Hammoudeh, Shawkat, 2019. "Importance of oil shocks and the GCC macroeconomy: A structural VAR analysis," Resources Policy, Elsevier, vol. 61(C), pages 166-179.
    7. Muhammad Akram GILAL* & Muhammad AJMAIR** & Sohail FAROOQ***, 2019. "Structural Changes And Economic Growth In Pakistan," Pakistan Journal of Applied Economics, Applied Economics Research Centre, vol. 29(1), pages 35-51.
    8. Anis Ali, 2021. "Volatility of Oil Prices and Public Spending in Saudi Arabia: Sensitivity and Trend Analysis," International Journal of Energy Economics and Policy, Econjournals, vol. 11(1), pages 165-172.

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