Saudi Arabia’s economy has struggled as the oil sector (28% of GDP in 2017) has had to digest weaker oil prices and production cuts under the OPEC agreement. This has forced the government to rein in its spending as oil accounts for 72% of revenues. But lower government spending has weighed heavily on the non-oil economy. Looking ahead the recovery in oil prices will support stronger growth prospects, while the potential partial privatisation of Saudi Aramco—the state owned oil company—would support the government’s coffers and spending.
Saudi Arabia is also pushing its ‘Vision 2030’ plan to reduce the dependence on oil over the coming years. The country’s admission to the WTO in 2005 and opening up of insurance, retail, communication and transport services to foreign investors have been major impulses for non-oil development. But the population of 27m still faces infrastructure, housing and job shortages. The problems in the labour market are mainly due to a heavy reliance on foreign labourers. The government is committed to reducing this reliance and ramping up spending on infrastructure and housing.