Economy of Saudi Arabia

free essayThe economy of Saudi Arabia moved from the 27th in 2003 to the 19th position among the largest in the globe in 2014. Its minimal GDP of approximately $750 billion is superior to that of Switzerland and Sweden. Based on a per capita, Saudi Arabia’s nominal gross domestic product of about $24,000 is a little less than South Korea’s and more than that of Portugal.

Rise in Sales Quantities as a Result of Increased Market Demand

As Malik and Awadallah (2013) state, Saudi Arabia is the largest exporter of oil in the world, making about 90 percent of government income from oil sales. The rapid rise in oil prices, which grew from about $30 per container in 2003 to a peak of approximately $110 per barrel in 2011- 2013 period then dropping again in 2014, provoked the doubling of GDP over the decade. At a time of increasing appreciation across leading economies since the 2008 monetary crisis, Saudi Arabia has been an exceptional success. The Kingdom eradicated national debt and amplified standby assets to $732 billion, almost equal to 100 percent of 2014 GDP (Malik & Awadallah, 2013).

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Oil exportation in Saudi Arabia rose in September 2015 by about 113,000 barrels a day, from 6.998 million barrels daily to 7.111 million BPD in the preceding month. Saudi Arabia has maintained this high production in a bid to guard its market share. It has also been pumping crude oil to local oil refineries to expand petroleum products.

Increase in Oil Prices due to High Quality

According to Gately, Al-Yousef, and Al-Sheikh (2012), oil contributes to about “90 percent of revenue in Saudi Arabia.” Oil prices possess numerous transmission networks into Saudi Arabia’s’ economic input and income. The rise in oil prices first raised the total worth of Saudi exports, without affecting import prices. This enhanced the trade in terms of the economy and the purchasing power of inhabitants, which was shown by amajor increase in Saudi Arabia’s actual gross domestic income (GDI) in the 2003–2013 decade. GDI indicates the purchasing strength of total revenues produced by domestic production (Gately, Al-Yousef, & Al-Sheikh, 2012).

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Diminished Future Costs Due To Internal Control Environmental Clean-Up and Breach of Ethics

According to Bradshaw & Brook (2014), during the oil price increase, as a result of trade terms gains, actual GDI in Saudi Arabia diverged strongly from the standard measure of economic activity. Real gross domestic product (GDP) was valued in volume terms and indicating oil production in constant prices. Besides, GDP is significantly affected by oil price inflations on both – the spending, or demand, side of the economy, and the supply, or production, side. As oil bills elevated during the 2003–2013 boom, the state and its oil producer gained windfall profits from the oil exports (Bradshaw & Brook, 2014).

Increased Productivity

According to Ray, Mueller, West, and Foley (2013), the development of the Saudi economy in productivity and size come as a result of the known market benefits. An example is productive labor force with a higher contribution, such that Saudi Arabia can raise production levels in sectors and deliver profitable employment for many young people entering the job market from now to 2030. The amplified participation and employment of women in the workforce is essential to increasing labor productivity (Ray, Mueller, West, & Foley, 2013). Although Saudi males need to participate fully in the workforce, female participation should be enhanced to facilitate household income growth both in the private and public sectors.

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Low Costs due to High Efficiency

Alyousef and Abu-Ebid (2012) claim that employment and welfare allocations are large comparing to costs and wages. Increasing efficiency involves making a more productive workforce through the renovation of the education system to improve educational standards in universities, developing vocational training and maximizing greater transition from education to employment, especially for university scholars. Numerous employers need to hire cheap migrant workers rather than Saudi nationals who are more expensive. Additionally, Saudi Arabia requires more efficient workforce with greater participation to raise production and employ the cohort of youths entering the job market (Alyousef & Abu-Ebid, 2012).

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Conclusion

Saudi Arabia has amassed profits from oil exportation. Due to high quality and prices, its economy has tripled over the years. This has led to the increased market benefits such as higher productivity and inclusion of more participatory labor force, which has immensely boosted its economy. As a result of the  increase in efficiency, Saudi Arabia has reduced its production costs over the years. This occurrence has helped in establishing its place in the world economy.