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- GDP (PPP):
- $1.7 trillion
- 3.4% growth
- 5.0% 5-year compound annual growth
- $53,624 per capita
- Inflation (CPI):
- FDI Inflow:
Saudi Arabia’s regulatory efficiency and open-market policies have lagged behind those of other emerging economies. In a global economic environment of low oil prices over the past years, dynamic gains from free flows of trade and investment have likewise fallen short, leading to sizable budget deficits.
In April 2016, in a notable policy shift, the kingdom unveiled a significant economic reform plan, Saudi Vision 2030. The plan, which seeks to increase foreign investment and enhance the overall competitiveness of the Saudi Arabian economy, includes the sale of up to 5 percent of the state-owned oil company, ARAMCO, and economic diversification through development of the private sector.
Saudi Arabia is an absolute monarchy ruled by King Salman bin Abdulaziz Al Saud, who became king following the death of his half-brother, King Abdullah, in January 2015. Oil revenues account for about 90 percent of export earnings and about 87 percent of government revenues. Saudi Arabia faces a rising threat from the Islamic State, which has recruited many young Saudis, as well as internal sectarian tensions between Sunni Muslims and the Shiite minority. Crown Prince Mohammad has taken the lead on security matters, including the Saudi-led coalition that intervened in Yemen in March 2015 to help the Yemeni government battle Iran-supported Houthi rebels.
Laws protecting private property are subject to Islamic practices. The slow and nontransparent judiciary is not independent and must coordinate its decisions with the executive branch. Despite some earlier moves to hold certain officials accountable, corruption remains a significant problem, and there is low transparency in the functioning of government as well as opacity about state budgets and financial practices.
Saudi nationals or citizens of the Gulf Cooperation Council and corporations pay a 2.5 percent religious tax mandated by Islamic law. The overall tax burden equals 4.6 percent of total domestic income. Government spending has amounted to 39 percent of total output (GDP) over the past three years, and budget deficits have averaged 4.6 percent of GDP. Public debt is equivalent to 5.8 percent of GDP.
With no minimum capital required, procedures for starting a business have been relatively streamlined. There is no mandated minimum wage, but wage increases have exceeded labor productivity. Oil prices must be at least $106 per barrel for Saudi Arabia to maintain its historically generous subsidies, for which Saudi nationals have paid zero taxes. In 2016, the government decreased some of those subsidies, but they still exceed regional averages.
Trade is important to Saudi Arabia’s economy; the value of exports and imports taken together equals 73 percent of GDP. The average applied tariff rate is 3.4 percent. Foreign investment is screened by the government, and state-owned enterprises distort the economy. Direct purchase of shares in Saudi companies listed on the stock exchange has been permitted since 2015, opening the market to foreign institutional investors.