The quest for economic diversification
Saudi Arabia has demonstrated strong growth in the midst of the falling global economy, and that growth can be attributed to more than just oil. Natural gas and tourism also have contributed to this boom, but it is unclear whether Saudi Arabia can generate enough jobs for its growing population.
Saudi Arabia is in the middle of a second year of strong growth despite the downturn in the global economy, and that growth is no longer solely based on oil. A more vibrant non-oil sector is developing, particularly natural gas, exploration for which should begin next year. Tourism is another area that the government would like to encourage, with substantial investment being put into the sector. However the main challenge remains generating enough jobs for Saudi Arabia's growing population.
Bank economists, who only months ago were forecasting negative growth and a small budget deficit, are revising their forecasts. According to Khan Zahid, chief economist at Riyad Bank: "This year will be another good year for the private sector, as the cumulative effects of high oil prices flow through and increase economic activity."
Saudi American Bank (SAMBA) chief economist Brad Bourland is equally optimistic about an economy that last year produced its first surplus since 1982. He says that "the outlook for 2001 is bullish - positive GDP growth even after a year of exceptional growth in 2000, another budget surplus and a trade surplus. Inflation will remain low, as will interest rates, and the riyal has strengthened against the euro, the yen and the pound."