Saudi Arabia’s economy improved in 2018 as the oil sector (42% of GDP in 2018) has recovered from weaker global prices and production cuts under the OPEC agreement. This has allowed the government to raise spending as oil accounts for 87% of revenues. Looking ahead the recovery in oil prices will support stronger growth prospects, while the potential partial privatisation of Saudi Aramco—the state-owned oil company (amongst the world’s largest companies)—would support the government’s coffers and spending.
Saudi Arabia is also pushing its ‘Vision 2030’ plan to reduce the dependence on oil over the coming years. The country’s admission to the WTO in 2005 and opening up of insurance, retail, communication, education and transport services to foreign investors have been major impulses for non-oil development. The plan has seen some success, with government revenues from non-oil sectors up 63% since 2017. But the population of 27m still faces infrastructure, housing and job shortages. The problems in the labour market are mainly due to a heavy reliance on foreign labourers. The government is committed to reducing this reliance and ramping up spending on infrastructure and housing.