A recent study by the King Abdullah Petroleum Studies and Research Center (KAPSARC) concluded that Saudi Arabia’s gross domestic product will become 60 percent more resilient to shocks, including fluctuations in oil prices, by 2030.
According to the study, which used standard models, the economic reforms of Vision 2030 will help make household spending in Saudi Arabia 40 percent less vulnerable to fluctuations, with expectations that it would contribute to stabilizing economic activity, increasing employment rates, per capita income and social welfare levels.
Oil revenues will remain an important source of revenue in the long term, the study noted, as the Kingdom will increase its oil production capacity by one million barrels per day in the coming years.
In parallel, the Saudi economy will continue to benefit from the reforms implemented since 2016 to improve the business environment and strengthen the private sector.
As a result of the new business environment provided by Vision 2030, the Kingdom advanced to the 24th rank in the Global Competitiveness Report, while the number of industrial establishments in the Kingdom increased by nearly half, with the service sector expanding by a tenth.
An International Monetary Fund report issued in August expected Saudi GDP to grow by 7.6 percent this year, surpassing India, making the Kingdom one of the fastest growing economies in the world.
Saudi Arabia has protected the local economy from oil price fluctuations by working within OPEC and the OPEC Plus system to achieve stability in the oil market, while it used its deposits and reserves in the Saudi Central Bank as a buffer to separate government spending from fluctuations in oil revenues.
However, Vision 2030 implemented many structural reforms, which helped increase flexibility and reduce the impact of price fluctuations on the Saudi economy.
Fahad Al-Alajlan, president of KAPSARC, stressed that flexibility has a vital role in increasing the economy’s ability to withstand major shocks and global crises, indicating that the Kingdom’s Vision 2030 has increased the strength of its economy during the Covid-19 pandemic.
He noted that expectations pointed that the Saudi economy would become more resilient - and therefore more robust, which would contribute to the recovery of the Kingdom’s economic cycle, which will benefit the government, companies and families in the medium and long term.
“The Impact of Economic Reforms on the Strength of the Saudi Economy” used an economic model developed by the Center to simulate the economy’s response to external shocks, using economic data, GDP and household income before and after the economic reforms set by Vision 2030, represented in economic diversification.