2013 Index of Economic Freedom

Saudi Arabia

overall score60.6
world rank82
Rule of Law

Property Rights40.0

Freedom From Corruption44.0

Limited Government

Government Spending52.2

Fiscal Freedom99.6

Regulatory Efficiency

Business Freedom68.2

Labor Freedom69.2

Monetary Freedom65.7

Open Markets

Trade Freedom77.3

Investment Freedom40.0

Financial Freedom50.0

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Quick Facts
  • Population:
    • 28.2 million
  • GDP (PPP):
    • $682.8 billion
    • 6.8% growth
    • 3.5% 5-year compound annual growth
    • $24,237 per capita
  • Unemployment:
    • 10.9%
  • Inflation (CPI):
    • 5.0%
  • FDI Inflow:
    • $16.4 billion
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Saudi Arabia’s economic freedom score is 60.6, making its economy the 82nd freest in the 2013 Index. Its score is 1.9 points worse than last year due to substantial declines in business freedom, property rights, trade freedom, and freedom from corruption. 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.

Driven largely by high oil prices and expansionary public spending, Saudi Arabia’s economy has expanded at an average growth rate of 3.5 percent over the past five years. However, there has been little progress in structural and institutional reform. The kingdom has lost economic freedom two years in a row, recording one of the 15 largest score declines in the 2013 Index. 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.

Despite some progress in previous years, the competitiveness of regulatory efficiency and open-market policies is also lagging behind other emerging economies. Dynamic gains from free flows of trade and investment continue to be undermined by bureaucracy and a lack of transparency.

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Background

Saudi Arabia is an absolute monarchy ruled by King Abdallah bin Abdul Aziz Al Saud. Early in 2011, pro-reform demonstrations were mounted by Shia activists in eastern Saudi Arabia, but they did not seem to have much impact. Most of the dominant Sunni population appeared to be satisfied by increased economic benefits and the monarch’s promise of greater political participation. As the world’s leading oil producer and exporter, Saudi Arabia dominates the Organization of the 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 and has sought to attract foreign investment and promote economic diversification. Islamist terrorists have targeted oil facilities, foreign workers, and the government, but a crackdown has forced al-Qaeda to move many of its Saudi operatives to Yemen.

Rule of LawView Methodology

Property Rights 40.0 Create a Graph using this measurement

Freedom From Corruption 44.0 Create a Graph using this measurement

Saudi courts do not always enforce contracts efficiently. The judicial system is slow, non-transparent, and vulnerable to interference from the ruling elite. Laws protecting and facilitating the acquisition and disposition of private property are subject to Islamic practices. Enforcement of laws protecting intellectual property rights has been weak. Government decision-making lacks transparency, and corruption remains a concern.

Limited GovernmentView Methodology

Saudi nationals or citizens of the Gulf Cooperation Council and corporations pay a 2.5 percent religious tax mandated by Islamic law rather than traditional income or corporate taxes. Overall tax revenue equals less than 6 percent of total domestic income. Government spending is equivalent to nearly 40 percent of total domestic output. Large oil revenues have kept the budget in surplus and public debt at less than 10 percent of GDP.

Regulatory EfficiencyView Methodology

Overall progress in easing constraints on business formation and operation lags behind improvements in other emerging countries. Starting a business takes 21 days in comparison to the world average of 30 days. A new employment quota system that enforces Saudiization has come into effect. There is no mandated minimum wage. The government influences prices extensively through subsidies and state-owned enterprises.

Open MarketsView Methodology

The trade-weighted average tariff rate is modest at 3.9 percent, but non-tariff barriers add to the cost of trade. The investment regime remains restrictive, and limits on foreign investment are maintained in some sectors. There are minimum capital requirements for foreign investors. The financial sector has undergone gradual transformation, with some restrictions on foreign investment in financial services eased.

Country's Score Over Time

Bar Graph of Saudi Arabia Economic Freedom Scores Over a Time Period

Country Comparisons

Bar Graphs comparing Saudi Arabia to other economic country groups

Regional Ranking

rank country overall change
1Bahrain75.50.3
2Qatar71.30.0
3United Arab Emirates71.11.8
4Jordan70.40.5
5Oman68.10.2
6Israel66.9-0.9
7Kuwait63.10.6
8Saudi Arabia60.6-1.9
9Morocco59.6-0.6
10Lebanon59.5-0.6
11Tunisia57-1.6
12Yemen55.90.6
13Egypt54.8-3.1
14Algeria49.6-1.4
15Iran43.20.9


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