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March 19, 2024

Chart of the Week: Saudi Arabia’s growth problem

by Fathom Consulting.

Middle East oil-producing countries are looking to diversify their economies away from oil ahead of the net-zero transition, through a mixture of tourism, sport, technology and efforts to become major transport hubs of the future. Saudi Arabia can be included among this number. However, the country has struggled to maintain consistent increases in the average standard of living, as measured through GDP per capita. There are issues comparing long-run data on GDP per capita in the Kingdom (last year’s census caused major revisions to the population data between 2010 and 2022). Nonetheless it is undeniable that the average standard of living, benchmarked against the US, is much lower than it was in the early 1980s, when high oil prices benefited the Saudi economy; and that living standards have followed a weak trend since the Global Financial Crisis, broadly in line with real oil prices. Of course, Saudi Arabia has seen an influx of migrants in recent decades and these now represent around one third of the total population, but the fall in GDP per capita remains true even when measured per head of the native population. Clearly, a new source of growth is needed.

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The views expressed in this article are the views of the author, not necessarily those of LSEG.


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