Assessing the Economic Political Drivers of Inflation in Saudi Arabia

Abstract

This study examines the economic and political drivers of inflation in Saudi Arabia, with a particular focus on the period from 2016 to 2024. Inflation plays a crucial role in shaping economic stability, living standards, and policy decisions. Given Saudi Arabia’s heavy reliance on oil revenues and its ongoing structural transformation under Vision 2030, understanding the factors influencing inflation is essential for effective economic management. The research explores how government policies, oil price fluctuations, monetary and fiscal policies, and external economic conditions influence inflation dynamics in the Kingdom.

The study adopts a qualitative and descriptive research approach based on secondary data, including academic literature, official reports from the Saudi Central Bank and the General Authority for Statistics, and international institutions. It also includes a comparative perspective by examining inflation drivers in another oil-dependent economy, Nigeria, in order to highlight similarities and structural differences in inflation dynamics.

The findings reveal that inflation in Saudi Arabia is driven by a combination of domestic reforms, oil market volatility, and global economic shocks. Major policy measures, such as the introduction of value-added tax (VAT), subsidy reforms, and fiscal consolidation under Vision 2030, have caused temporary increases in inflation but have also contributed to long-term economic sustainability. The fixed exchange rate between the Saudi riyal and the US dollar has helped maintain price stability but limits monetary policy flexibility. The study also shows that inflation disproportionately affects low- and fixed-income households despite government support programs.

Overall, the research concludes that Saudi Arabia’s inflation is relatively moderate compared to many economies, largely due to strong institutional capacity and coordinated fiscal and monetary policies. However, continued economic diversification, improved inflation monitoring, stronger social protection systems, and effective policy coordination will be essential to maintain price stability and support sustainable economic growth in the future.