Topic: Oil Fuels Saudi Arabia's Post-Pandemic Recovery

 As per preliminary estimates from the Saudi government, the economy has grown at nearly its fastest rate for a decade. Fuelled, in a literal and figurative sense by higher oil prices, GDP expanded by 6.8% when compared to the same quarter of 2020. This comes as a backdrop to a 4.1% contraction of growth across 2020, owing to the coronavirus pandemic. 

Analysis

These results come as a relief to Saudi leadership. The Saudi state, perhaps more so than any other nation on earth, is seeking to change the way in which its economy operates. After being heavily reliant on oil revenue for most of its modern history, in 2016 the Crown Prince, Mohammed Bin Salman launched the 'Vision 2030' plan. This initiative aimed  to reduce Saudi dependency on oil (accounting for approximately 30-40% of GDP, excluding sectors dependant on oil distribution) by generating revenue from taxes, income from sovereign wealth fund and other fees. Highly ambitious in what it seeks to achieve, the plan thus far has seen mixed results. 

Prior to the coronavirus outbreak, centrally managed projects in the Kingdom were met with success, whilst other, less 'directable' performance indicators, though not reaching their lofty goals, were moving slowly in the right direction. The pandemic put a stop to this, severely damaging the Saudi economy. The government was forced to take action to soften the economic blow, cutting expenditure, raising import duties and tripling value added tax. 

Yet now it appears it is oil that is once more revitalising Saudi economic prospects. With the diversification of the Kingdoms economy still an imperative and plans lagging behind, the funds generated by higher oil prices could not come at a better time. Indeed, these funds will be much needed to pull the country away from oil itself, with the Crown Prince pledging to reach net zero by 2060. For this, he recently pledged 700 billion Riyals ($187 billion), whilst also pledging to produce half of Saudi energy through renewables by 2030, as well as planting 10 billion trees over the coming decades. 

(Source: Getty images via: https://www.independent.co.uk/news/uk/politics/uk-troops-saudi-arabia-arms-oil-fields-mod-parliament-secret-b1762474.html)