The Kingdom of Saudi Arabia’s GDP Analysi, Case Study Example

The Saudi Arabia is one of the world’s major economies, currently ranked 20^th. In the Middle East, the Kingdom of Saudi Arabia is an oil powerhouse, having the largest deposits of oil in the world. The economy is largely dependent on energy, both renewable and non-renewable. Saudi Arabia, being one of the world’s most important economies, can be analyzed according to the different facets of an economy. This analysis is vital in identifying the underlying trends within the country’s economy, relative to the behavior and performance of other economies as well as the global economy at large. An analysis of the country’s GDP (gross domestic product) will act as an essential indicator of the economy’s performance within the last four years.

Gross Domestic Product (GDP)

Real GDP

Real GDP is a measure that indicates the value of all goods and services produced by a given country within a one-year period. This is usually calculated relative to the base-year prices. Real GDP is essentially the gross domestic product, taking into consideration the effect that inflation has. Saudi Arabia’s GDP has been fluctuating over the past four years. This is characteristic of economies that largely depend on oil, affected by the changing global oil prices.

Saudi Arabia’s GDP had experienced a considerable slump during the first six months of 2010. This was because of reducing global oil prices. However, when oil prices picked up in the last 6 months of the year, the GDP realized growth. As depicted in Figure 1, Saudi Arabia’s GDP was at its highest after 2012. This period was characterized by increasing oil prices and an annual GDP growth rate of between 7% and 10%.

Nominal GDP

During the 1990s, a huge portion of Saudi Arabia’s real GDP resulted from the production and sales of oil. However, over the past 15 years, this figure has been on the decline. While this would be associated with a growth and development of other sectors, the economy is still dependent on oil. When the prices of oil increase, the prices of other commodities increases. This creates a ripple effect that oil has on Saudi Arabia’s GDP in nominal terms.

Components of GDP for the most recent year if data available

The most important components of Saudi Arabia’s economy are mainly defined by the type of industries that are currently functioning. The most significant component is the oil and petroleum industry, which makes up for more than half, 55% of the GDP. The private sector accounts for the second most significant component of the country’s GDP. The government has been highly supportive of the initiative engaged by the private sector in the past two decades. This has been one of the initiatives that the government has created to reduce overdependence on the oil industry.

Growth of Real GDP over the last 20 years

Saudi Arabia’s real GDP has been growing relative to the performance of the oil industry. Owing to the fact that the country is still dependent on the oil industry, Real GDP has been inconsistent with the fluctuations in global oil prices. In 2011, the global oil supply experienced a shortage with political and social unrest in Libya, another key producer and supplier of crude oil. This shortage led to a price increase, leading to boosted production of oil in Saudi Arabia. This led to the country’s GDP hitting an all-time high in the 2012 financial year.

Real GDP per Capita in the last 20 years

Saudi Arabia’s Real GDP per capita has always been inconsistent with the fluctuations in global oil prices. However, it has always maintained a general trend of growth. In 2009, there was an uncharacteristic 22.8% decline in real GDP per capita. However, this can be associated to be the aftermath of the 2008 global crisis.

Comparing KSA’s Economy to the G20

One of the most useful economic tools is comparing the performance of top economies with the subject economy. On this case, the G-20 economies will provide a good benchmark for comparison of performance. Though Saudi Arabia is one of the weaker members in terms of the strength of their economy, it is a significant member owing to its influence on global oil prices.

The standards of health in a given economy can be gauged by the life expectancy of its nationals. In Saudi Arabia’s life expectancy is currently ranked 108^th globally, standing at 74.82. Compared to the other G-20 economies, it has a very low life expectancy.

There have been major developments in the education sector in Saudi Arabia. This can be measured by the country’s 66^th place rank in mathematics and science (BBC). This is evident in the number of technological innovations that are currently originating from the country.

In conclusion, Saudi Arabia’s GDP is prone to fluctuations as a result of dependence on the oil industry. This makes the country prone to the potential severe effects of price fluctuations. However, the economy is continually developing other industries to enhance its performance in the long-term.

Works Cited

BBC. “Asia tops biggest global school rankings.” 13 May 2015. BBC.com. Internet Source. 8 June 2015. <http://www.bbc.com/news/business-32608772>.

CountryEconomy.com. “Saudi Arabia – Life expectancy at birth.” 31 March 2015. CountryEconomy.com. Internet Source. 28 June 2015. <http://countryeconomy.com/demography/life-expectancy/saudi-arabia>.

The World Bank. “Saudi Arabia.” 1 March 2015. WorldBank.com. Internet Source. 28 June 2015. <http://data.worldbank.org/country/saudi-arabia>.