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Saudi Arabia’s economy has grown very strongly in recent years, and has been one of the best performing in the G-20. It has benefited from high oil prices and output, strong private sector activity, and government spending. Rising oil prices and production have resulted in large external and fiscal surpluses, while government debt has declined to 2.7 percent of GDP. Fitch recently upgraded Saudi Arabia’s sovereign credit rating to AA. Inflation has been moderate, and human and social development indicators have improved significantly.
As the second largest crude oil exporter and the only producer with significant spare capacity, Saudi Arabia plays a systemic and stabilizing role in the global oil market. Saudi Arabia has proven oil reserves of 266 billion barrels and a current estimated spare production capacity of 2.7 million barrels a day. With uncertainties about the global oil market outlook stemming from the strength of the global recovery, the path of U.S. oil production, and the extent of supply outages in other countries, the importance of this role will continue.
Domestically, key policy priorities are addressing the jobs and housing needs of the young and rapidly growing population. Within the labor market, Saudis are primarily employed in the public sector, non-Saudis dominate employment in the private sector, and female labor force participation, while rising, is low. The Saudi labor force has grown by nearly 4¾ percent a year over the past decade and is expected to continue growing rapidly in the coming years. Labor market reforms are being implemented to boost private sector job creation for nationals. In addition, high house prices are making it difficult for younger or less well-off people to enter the housing market, and the government is making large investments to increase the supply of housing, particularly for the less well-off.
Another priority is economic diversification. Investments in transportation infrastructure, improvements to the business environment, SME financing, the development of industrial clusters around oil and mining, and joint ventures in refining, mining, and banking are all part of this effort.
Source: International Monetary Fund Updated: September 2014
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