Determinants of economic growth in Saudi Arabia

Economic Growth in Saudi Arabia

Determinants of Economic Growth: the Case of Saudi Arabia

Economic growth is a top priority among both industrialized and developing nations. Economic growth has a positive effect on society by promoting a higher standard of living and improved social welfare systems. Economic growth has attracted considerable academic attention in the past several years. As a result, methods have been developed that attempt to interpret and classify the most important determinants of economic growth. Studies concentrate on a group of determinates that are considered to be the most important ones. These include labor, capital, exports, government expenditure, financial innovation, and private investment.

The Kingdom of Saudi Arabia is known for its continuous economic growth during the past few decades. However, it now faces challenges and social problems of that threaten to affect its ability to achieve an acceptable level of sustainable economic development in the future. Sustainable development is necessary if Saudi Arabian citizens wish to achieve a higher standard of living. During the past three decades, the Saudi economy passed through several different stages. It experienced a high level growth during the 1970s, which was followed by a period of economic stagnation during the 1980s and 1990s. Economists have largely attributed this to fluctuations in oil prices and the revenue that could be derived from this essential Saudi Arabia and resource.

Significance of the Study

This study will address the most important variables that affect the growth of the Arabian economy. It will focus on the oil industry, as Saudi Arabia represents over 25% of the total GDP among oil producing countries in the Middle East. With Saudi Arabia oil production playing such a key role in the overall economy of the Middle East, finding methods of that can accurately predict its future economic growth will have an impact not only on Saudi Arabia, but on the rest of the Middle East and the rest of the world that is affected by fluctuations in oil prices. This study that will explore methods to better predict the future of the Saudi Arabian economy using key economic indicators.

Hypothesis and Research Questions

The research hypothesis will state that the factors of labor, capital, exports, government expenditure, financial innovation, and private investment will be predictive of future economic growth in Saudi Arabia.

In order to understand this hypothesis in greater detail the following research questions will be addressed.

1. What role will the oil industry play in determining the economic future of Saudi Arabia?

2. How much weight should each of these factors receive to have the greatest predictive value?

3. Which factors will have the greatest importance?

4. Will factors that were important in the past have the same importance and predictive value in the future?

Aims and Objectives

The aim of this study is to develop a method for predicting the future economic growth of Saudi Arabia. The primary objective will be to develop a model that can successfully predict economic growth in Saudi Arabia and other developing countries. A secondary objective will be to test the new model in the Kingdom of Saudi Arabia and to evaluate its performance. The third objective will be to determine the effects of the Asian economy crisis on the model. This model will be important in helping decision makers in Saudi Arabia achieve a steady rate of sustainable growth. In order to achieve these objectives the model will have to take into account the importance of the oil industry, as well as the overall economic structure of Saudi Arabia.

Study Design

Study Methodology

This study will use a combination of methodologies to achieve its objectives. It will use a descriptive methodology that will include the conduct of a theoretical review of economic growth determinants. It will focus on the Saudi economy using studies that have been conducted by other parties in the past. It will only consider studies that are published by credible academic sources and government agencies in order to keep data credibility intact. The second method to be used will be an empirical methodology. This portion of the study will involve designing a model for analyzing the time series data to determine the short- and long-term relationship between economic growth the various determinants under study.

Study Population and Sampling

Sampling data will only be derived from the Kingdom of Saudi Arabia using sources that cover the period from 1970-2005. Data will be collected from the Saudi Arabian Monetary Agency (SAMA). Sources of data will include annual reports, statistical reports published by the General Department of Statistics (GDS), Ministry Planning Reports (Developments Plans Achievements) as well as IMF and UN publications.

Data Collection Methods and Instruments

The data collection method will involve an examination of existing reports and sources on the determinants of economic growth in Saudi Arabia. It will include materials that include tables and charts of various trends. It will also include narratives and descriptions of the effects of different determinant of economic growth. The key instruments to be used in this research study will include tables, charts, and various forms that will help to organize the data in a way that will make it meaningful. The final form of these tables and charts will be dependent upon the form and types of data that are found during the conduct of the research.

Data Analysis Methods

Data analysis methods will be similar to those used by Asseery & Al-Sheikh (2004). They will include multiple regression analysis based on cointegration techniques. Error correction techniques will be applied that are similar to that which was found in Plazolo & Bank (1995). These and other sources found in the literature review will be used in the construct of the data analysis methods.

Quality Assurance Methods

Quality of the final research will be dependent on the credibility of the sources used and the data contained within them. Statistical methods will also be applied to help reduce errors and assure quality of the final research product. Many of these methods are dependent upon the data which is found, the form it is in, and other factors that cannot be determined until data collection begins.

Conclusion

Determining the factors that influence economic growth plays an important role in determining economic policy, and other laws that will affect the welfare of the country. Saudi Arabia is unique in its dependency on a single natural resource. Oil plays a significant role in the economy of Saudi Arabia and in the economies of other nations of within the Middle East. Their dependency on oil makes of determining the economic growth factors different than in countries that have greater diversity in economic resources. This research will play an important role in developing models that can help to assess the affects of various determinants of future growth in the Saudi Arabian economy. Understanding these factors will help Saudi Arabia to achieve the growth that it desires in the future. This study will play an important role in the development of models to help in this objective.