Saudi Arabia’s GDP Drop in 2020: Limited Economic Diversification
Saudi Arabia Economic Diversification
KSA’s Sharp GDP Drop
´In 2020, Saudi Arabia experienced a significant drop in its Gross Domestic Product (GDP), primarily due to the dual impact of the COVID-19 pandemic and a sharp decline in global oil prices since Saudi Arabia is a major oil-producing country, and its economy is heavily dependent on oil exports whre the global oil market experienced a sharp decline in prices due to a combination of factors, including reduced demand during the pandemic and a price war between major oil-producing nations.
´The above plot shows the sharp GDP drop from 840 billion dollars in 2019 to 730 billion dollars in 2020. According to several Saudi Arabia’s government, this was due to the decline of global oil prices.
Potential Solution
´The Solution is Diversifying the Saudi economy away from its heavy reliance on oil and investing in non-oil sectors like tourism, technology, and manufacturing and other sectors, Thus approaching the problem of GDP discussed, the government decided to invest in a non-oil sector that is the industrial sector and increase the manufacturing rate of several products which aims to diversify the economy of Saudi Arabia instead of only depending on oil and gas production.
KSA goverment invested in manufacturing such as petrochemical complexes: development of petrochemical complexes that can produce a wide range of products, including plastics, fertilizers,…
´This plot shows the increase in the manufacturing value from 93 billion dollars in 2020 to 163 billion dollars in 2022 after increasing the investment in this industry.
Findings
´After 2 years of applying diversification and investing in a non-oil industry we noticed a sharp improvement in the gross domestic product(GDP) which highlights the importance of the initiative we took.
Solution Validation
The Dashboard below shows that the solution proposed was a direct cause for GDP increase between 2020 and 2022.
Conclusion
Economic diversification is a multifaceted process that offers numerous advantages, including increased resilience, job creation, and sustainable development. While challenges exist, the potential long-term benefits make diversification a valuable strategy for countries seeking to build robust and adaptable economies