The GDP Analysis- Saudi Arabia, Essay Example

A very important economic element for investors to consider when engaging in international finance is that of gross domestic product or (GDP). This is a way of summarizing the total production of an entire economy into a single number which then becomes the given country’s GDP. GDP is the total market value of all of the final goods and services produced within an economy in any given year. GDP also serves as the most common measure of an economy’s total output. In the case of Saudi Arabia, their GDP is currently at the highest it has ever been. As of January 2014, Saudi Arabia has a GDP of 745.27 billion in US Dollars (USD). (Economics)

The rate of Saudi Arabia’s GDP accounts for 1.2% of the total global economy. Saudi Arabia carried a median GDP of 192.97 billion USD for 45 years between 1968 through 2013. By the year 2013, Saudi Arabia had reached an all-time high of 745.27 billion USD after a 1968 record low of 4.19 billion USD. Saudi Arabia’s GDP is as reported via the World Bank Group. (Economics)

Growth rate for Saudi Arabia has fluctuated significantly over the past few decades. The GDP in Saudi Arabia has experienced an increase of 2% in the 4^th quarter of 2014 over the initial quarters. The GDP rate of growth for Saudi Arabia experienced a median of 5.18% from 1969 through 2014. This allowed for a reach of an all-time high amounting to 27.49% in the 4^th quarter of 1974 along with a record low amounting to -11.10% in the 4^th quarter of 1982. The GDP rate of growth in Saudi Arabia is reported via the Central Department of Statistics & Information. (Finance)

Saudi Arabia is mostly comprised of an oil based economy. The exports of oil make up for about 87% of the total export shipments as well as for about 46% of the GDP. Recent years show that in an attempt to make the Saudi Arabian economy more diverse, the government has been making investments in a variety of ventures such as telecommunications, natural gas exploitation, petro-chemicals, as well as power generation reactors. (Clemente)

As reported by the International Monetary Fund or (IMF), Saudi Arabia will be required to to take substantial measures to restrict public spending as well as decrease their dependency on their natural sources of oil serving as their primary revenue as it reverts to the previous year’s drop in crude oil prices. A decade long of rushing prices in oil allowed the Gulf Arab exporters of oil which was headed by Saudi Arabia, to invest billions of dollars on projects for infrastructure, social programs, as well as new strategies for foreign policy. (Audi)

The drop in revenues has corresponded with confusion within the environment, where Saudi Arabia is getting progressively concerned about the attainment of their regional economic rival in Iran. The IMF predicts that Saudi Arabia’s non-oil related economy will expand to about 4.6% through 2015, which is actually down from the 5% last year as well as the 6.5% forecasted in 2013. This is a strong indicator that Saudi Arabia’s GDP is primarily dependent on their oil based economy. (Audi)

As the Saudi Arabian economy grows, so does their need for higher outputs of petroleum oil. Oil and natural gas are the only primary sources of energy in the Middle East, meaning that these are the only sources that register for a percentage of GDP. Each source, both oil and natural gas, account for nearly 50% of the supply in Saudi Arabia as well as the Middle East. Furthermore, the entire region maintains rather cheap costs in production that help to influence its use. For instance, in Saudi Arabia, it may cost only about $5 USD for the extraction of one barrel of oil. On top of this, huge oil provides allowance to promote a higher demand while at the same time influencing wasteful habits. Saudi Arabia definitely hands out the greatest amount in oil subsidies which maintains artificially lower prices. (Finance) (Audi)

According to the Bank Audi Group in their June 2014 report, the GDP break down for Saudi Arabia is as follows; 44.8% for mining and quarrying, 35.1% for trades and services, 10.1% for manufacturing, 4.7% for construction, 2.4% for petroleum refining, 1.8% for agriculture, forestry, and fishing, and finally 1.1% for electricity, gas, and water. (Audi)

Also, according to the same report, it has shown that from 2008 through 2013 that crude oil production outputs have been generally higher than crude oil exports. Again these statistics further demonstrate that Saudi Arabia’s outputs in oil are their strongest asset in regards to GDP. (Audi)

Their main exports are identified at 85.7% for mineral products, 4.9% for chemicals, 4.5% for plastics, and 4.9% for other exports. Saudi Arabia’s imports are comprised of 43.3% for machinery and transport equipment, 22.9% for chemical and base metal products, 14.3% for foods, vegetables, and livestock animals, and finally 19.5% for other imports. Considering their strong growth in total GDP in recent years, Saudi Arabia should continue to grow because of their sources of oil. However, the government may want to consider other sources that can contribute to their GDP. (Audi)

Works Cited

Audi, Bank. Saudi Arabia Ecnomic Report. 2014. 18 June 2015 <http://www.bankaudigroup.com/GroupWebsite/openAudiFile.aspx?id=2297>.

Clemente, Jude. The Middle East’s Growing Oil Demand Problem. 2015. 28 June 2015 <http://www.forbes.com/sites/judeclemente/2015/03/29/the-middle-easts-growing-oil-demand-problem/>.

Economics, Trading. Saudi Arabia GDP. 2015. 28 June 2015 <http://www.tradingeconomics.com/saudi-arabia/gdp>.

Finance, Global. Saudi Arabia GDP and Economic Data. 2015. 28 June 2015 <https://www.gfmag.com/global-data/country-data/saudi-arabia-gdp-country-report>.