Saudi Arabia – Economy Overview

• Capital: Riyadh
• Area: 2,149,690 km²
• Population: 27,601,038
• GDP (PPP): US$555.055 billion
• GDP (Nominal): US$381.938 billion
• Currency: Riyal
• Time Zone: GMT+ 3

U.S. geologists discovered oil reserves in Saudi Arabia in the 1930s, which led to the start of large scale production after World War II. This newfound oil wealth made it possible for the country to develop its economy rapidly, a process beginning in the 1960s and gaining momentum in the 1970 and radically transforming the Middle Eastern kingdom, mainly with implementation of major infrastructure developments. Saudi Arabia has in its possession the largest oil reserves in the world, making it the world's number one oil producer and exporter. Oil production is responsible for over 90% of the country's exports and almost 75% of budget revenues. Proven estimates show that Saudi Arabia is still in possession of approximately one-quarter of the world's oil reserves.

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A sharp rise in petroleum prices in 1974, following the Arab-Israeli war of 1973, jump started the Saudi Arabian economy to become one of the fastest-growing economies in the world. The results were a substantial surplus in international trade; a rapid increase of imports; and plentiful budget revenues available for development, defense, as well as aid to neighboring Arab and Islamic countries. However, higher oil revenues led to the development of more oil fields around the world which gradually reduced global oil consumption. As a result, the mid-1980s saw a worldwide oil surplus, which signaled uncertainty for the Saudi Arabian economy for the first time in a decade. Oil production dropped rapidly in 1985, leading to the development of budget deficits, and the minimization of foreign assets. Due to financial pressures, Saudi Arabia was forced to give up its role as the "swing producer" within OPEC in 1985 and to accept a standard production quota. Since then, Saudi policy has been focused on maintaining market and quota shares and on promoting stability in the international oil market.

Industry

Despite the clear dominance of the petroleum production industry in the Saudi economy, there has been room for the development and flourishing of other secondary industries. The chief among those is the Saudi petrochemical industry. Others include the production of ammonia, industrial gases, sodium hydroxide (caustic soda), fertilizer, plastics, cement, construction, as well as commercial ship and aircraft repair.

Trade

In the early 2000s Saudi Arabia has opened negotiations to join the World Trade Organization. The crux of these lay in the extent to which Saudi Arabia is willing to increase market access to foreign goods and services and the time it would take for it to become fully compliant with World Trade Organization regulations. In 2000, the Saudi government founded the Saudi Arabian General Investment Authority whose role is to encourage foreign direct investment in Saudi Arabia. Despite this progress, Saudi Arabia still maintains a list of sectors where foreign investment is prohibited. Recent years, however, showed gradually growing willingness to open some of these closed sectors such as insurance, telecommunications, and power transmission and distribution. As of November 2005, Saudi Arabia has been officially approved for membership in the World Trade Organization.

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