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- GDP (PPP):
- $906.8 billion
- 6.8% growth
- 6.6% 5-year compound annual growth
- $31,275 per capita
- Inflation (CPI):
- FDI Inflow:
Saudi Arabia’s economic freedom score is 62.2, making its economy the 77th freest in the 2014 Index. Its score is 1.6 points better than last year, reflecting improvements in the control of government spending, labor freedom, and monetary freedom that outweigh combined score declines in trade freedom and business freedom. Saudi Arabia is ranked 8th out of 15 countries in the Middle East/North Africa region, and its overall score remains above the world average.
Saudi Arabia was first graded in the 1996 Index, and its economic freedom score has declined since then by 6.1 points. Rating gains in trade freedom, investment freedom, and the management of government spending have been overwhelmed by substantial double-digit declines in property rights, freedom from corruption, and overall regulatory efficiency.
Reflecting the lack of progress toward greater economic freedom, Saudi Arabia’s economy has been rated only “moderately free” throughout the country’s 19-year history in the Index. The kingdom’s overall economic freedom remains constrained by institutional shortcomings. The perceived level of corruption has increased, and the legal system remains susceptible to political influence. Saudi Arabia’s property rights score is now lower than the world average.
Saudi Arabia is an absolute monarchy ruled by King Abdallah bin Abdul Aziz Al Saud. Pro-reform “Arab Spring” demonstrations in 2011 drew few crowds outside of eastern Saudi Arabia, where the Shia minority population is concentrated. Most of the Sunni majority appeared to be satisfied with increased economic handouts and the king’s promise of greater political participation. As a leading oil producer and exporter, Saudi Arabia dominates the Organization of Petroleum Exporting Countries. Oil revenues account for about 90 percent of export earnings and about 80 percent of government revenues. Saudi Arabia joined the World Trade Organization in 2005 as part of an effort to promote foreign investment and economic diversification.
Corruption remains significant. A 2011 royal decree established an anti-corruption commission to monitor government departments, but administrative obstacles have continued to hinder the commission’s success. The slow and non-transparent judiciary is not independent and must coordinate its decisions with the executive branch. Laws protecting private property transactions are subject to Islamic practices.
Saudi nationals and Gulf Cooperation Council citizens are not subject to any income tax, but a 2.5 percent zakat, or religious tax mandated by Islamic law, is levied on all Saudi citizens’ net worth. Non-Saudi companies are subject to a 20 percent corporate income tax. The overall tax burden equals 3.7 percent of GDP. Government expenditures make up 35 percent of gross domestic income, and public debt is less than 5 percent of GDP.
Incorporating a business takes nine procedures and about three weeks on average, and no minimum capital is required. Obtaining necessary permits costs about a quarter of the level of average annual income. A new employment quota system enforces “Saudiisation.” There is no mandated minimum wage. In 2013, the Minister of Economy admitted that extensive government subsidies and state-owned enterprises distort the economy.
Saudi Arabia’s average tariff rate is 5.5 percent. Non-tariff barriers affect several categories of imports. The government limits foreign investment in several sectors of the economy. The financial sector has undergone gradual transformation, and some restrictions on foreign investment in financial services have been eased. The government retains majority shares in the largest bank and offers subsidized credit to preferred sectors.