A new paper published by the King Abdullah Petroleum Studies and Research Center (KAPSARC) in Saudi Arabia examines the Kingdom’s advances in economic diversification so far under Saudi Arabia’s Vision 2030 social and economic reform plans, launched in 2016.
“Economic conditions may change radically either throughout a decade or within months. The question is whether there is no other option for a hydrocarbon resource-rich economy than to be held hostage to the fluctuations in global oil prices. The general answer to a changing environment is: Adapt!” the authors, David Havrlant and Abdulelah Darandary write. “From the macroeconomic perspective, this means diversifying the economy to broaden the income base and significantly reduce the dependence on oil revenues. The Saudi Vision 2030 represents a complex plan for substantial socioeconomic adjustments that are about to move the economy toward a more diversified and sustainable one.”
The paper examines the preferred diversification paths for the Saudi economy “in more detail, with a focus on the foreseen adjustments in the sectoral composition of the economy along with broader macroeconomic shifts.”
“The evaluation of the foreseen diversification impacts is based on the updated Vision 2030 Input-Output Table that maps the changing structure of the Saudi economy over the coming decade. We discuss the assumed expansion of the diversification frontrunners, their changing contribution to the overall economic activity and identify the preferred diversification paths for the Saudi economy. The advances in economic diversification are measured by applying the Shannon-Weaver index to sectoral GDP and household income. The expected sectoral changes are wide-reaching, so the basic macroeconomic relations are also subject to adjustments. We also conduct a sensitivity analysis to examine the effects of the foreseen diversification on the resilience of the Saudi economy to external shocks.”
