Saudi Economy to Wean Itself Off-Oil (Vision 2030: Diversification).

Abstract

Saudi Arabia discovered commercial quantities of oil in 1938 near Dhahran. This natural bounty, oil, as a natural gift has made the country incredibly wealthy and transformed the lives of both the nation and the ordinary person. The main objective of 'Vision 2030’ is diversification from oil (seeing as it is a depletable resource) with the aim of achieving long-term sustainable development for the country. This paper examines the most important non-oil determinants (the Public Investment Fund), as a proxy for the diversification strategy by means of using the novel difference-in-difference (DD) methodology to study the relationship between total expenditure and the Public Investment Fund. Secondly, it explores the relationship between gross domestic product (GDP) and its determinants. Nevertheless, the main focus of this paper is on the role of the non-oil sectors, given the government’s determination to diversify its dependence on non-oil income. The study makes use of country level time series data from 1985 to 2019, such as total expenditure, the Public Investment Fund, gross domestic product, government spending on education, health and defence. Empirical results show that after 2015 (Vision 2030), the government of Saudi Arabia is continuing to diversify its economy quite successfully. In addition, the results of the second regression demonstrates that the gross domestic product (GDP) of Saudi Arabia will depend on the Public Investment fund in the future. It should also be noted that further evidence also highlights the importance of an additional variable in enhancing economic growth.