Kingdom Coming

Saudi Arabia's Economic Road Ahead

Muslim men use their cell phones to take photos at the Grand Mosque in Mecca, March 2011. Parivartan Sharma / Reuters

Saudi Arabia has embarked on a path of radical transformation. The immediate catalyst has been the prolonged collapse of oil prices and resulting budget deficits (estimated to be near $87 billion for 2016, or about 13 percent of GDP). Looming in the background, meanwhile, is a massive demographic bulge that will bring some six million additional Saudis into the workforce over the next 15 years, roughly doubling the number of Saudis in the labor market. Indeed, demographics, not oil prices, must be understood as the underlying driver of the Kingdom’s change initiative. Population growth is of such a magnitude that, even if oil prices were to rally, the current economic model (in which 80 percent of national household income comes directly from the government, via public sector salaries and assorted handouts) would be unsustainable.

Riyadh recognizes the problem, and it has a game plan: the ambitious Vision 2030 and the National Transformation Program, both of

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