Saudi Arabia - Economy

Economy

Saudi Arabia's command economy is petroleum-based; roughly 75% of budget revenues and 90% of export earnings come from the oil industry. The oil industry comprises about 45% of Saudi Arabia's nominal gross domestic product, compared with 40% from the private sector (see below). Saudi Arabia officially has about 260 billion barrels (4.1×1010 m3) of oil reserves, comprising about one-fifth of the world's proven total petroleum reserves.

The government is attempting to promote growth in the private sector by privatizing industries such as power and telecommunications. Saudi Arabia announced plans to begin privatizing the electricity companies in 1999, which followed the ongoing privatization of the telecommunications company. Shortages of water and rapid population growth may constrain government efforts to increase self-sufficiency in agricultural products.

In the 1990s, Saudi Arabia experienced a significant contraction of oil revenues combined with a high rate of population growth. Per capita income fell from a high of $11,700 at the height of the oil boom in 1981 to $6,300 in 1998. Increases in oil prices since 2000 have helped boost per capita GDP to $17,000 in 2007 dollars, or about $7,400 adjusted for inflation. Taking into account the impact of the real oil price changes on the Kingdom's real gross domestic income, the real command-basis GDP was computed to be 330.381 billion 1999 USD in 2010.

Oil price increases of 2008–2009 have triggered a second oil boom, pushing Saudi Arabia's budget surplus to $28 billion (110SR billion) in 2005. Tadawul (the Saudi stock market index) finished 2004 with a massive 76.23% to close at 4437.58 points. Market capitalization was up 110.14% from a year earlier to stand at $157.3 billion (589.93SR billion), which makes it the biggest stock market in the Middle East.‏

OPEC (the Organization of Petroleum Exporting Countries) limits its members' oil production based on their "proven reserves." The higher their reserves, the more OPEC allows them to produce. Saudi Arabia's published reserves have shown little change since 1980, with the main exception being an increase of about 100 billion barrels (1.6×1010 m3) between 1987 and 1988. Matthew Simmons has suggested that Saudi Arabia is greatly exaggerating its reserves and may soon show production declines (see peak oil).

Saudi Arabia is one of only a few fast-growing countries in the world with a relatively high per capita income of $24,200 (2010). Saudi Arabia will be launching six "economic cities" (e.g. King Abdullah Economic City) which are planned to be completed by 2020. These six new industrialized cities are intended to diversify the economy of Saudi Arabia, and are expected to increase the per capita income. The King of Saudi Arabia has announced that the per capita income is forecast to rise from $15,000 in 2006 to $33,500 in 2020. The cities will be spread around Saudi Arabia to promote diversification for each region and their economy, and the cities are projected to contribute $150 billion to the GDP.

However the urban areas of Riyadh and Jeddah are expected to contribute $287 billion dollars by the year 2020.