The economic development of Saudi Arabia has undergone significant transformations in the past decade, driven by the need to diversify its economy, the correlation of its currency with the US dollar, and its geopolitical impact in the Middle East. This article analyzes Saudi Arabia’s progress in these areas and its projections for the future, paying special attention to recent events such as the fall of Bashar al-Assad and the visit of the new president Al Golani to Riyadh.

Economic Diversification in Saudi Arabia

Historical Context and Motivation

Traditionally, the Saudi economy has heavily relied on oil revenues, which account for around 90% of its government income. However, this dependence has made it vulnerable to fluctuations in crude oil prices. With the decline in oil prices in 2014, Saudi Arabia was forced to rethink its economic strategy. In this context, the «Vision 2030» program, launched in 2016, has become the main framework for economic diversification.

Strategic Sectors

«Vision 2030» aims to reduce dependence on oil and develop sectors such as tourism, renewable energy, mining, manufacturing, and technology. Initiatives like NEOM, a planned megacity, are key examples of this diversification. By 2025, tourism-related efforts are expected to represent a significant percentage of the country’s GDP.

Impact on GDP

Growth of the Saudi GDP

The growth of Saudi Arabia’s GDP has proven resilient amidst challenges. Since 2010, real GDP has fluctuated, with notable growth in years when oil prices have stabilized. Projections indicate that economic diversification and structural reforms will lead to sustained GDP growth, with an expected annual increase of 4% by 2025.

Foreign Investments

Opening the Saudi economy to foreign investment has played a crucial role in this development. Initiatives to improve the business environment, such as the creation of special economic zones and streamlining bureaucratic processes, have contributed to attracting foreign capital.

Currency Correlation with the Dollar

Pegging of the Saudi Riyal

Since 1986, the Saudi riyal has been pegged at a rate of 3.75 riyals per US dollar, providing stability and predictability to the Saudi economy. This parity has allowed the country to stabilize its economy amidst global fluctuations, although it has also been the subject of analysis regarding its adaptability to potential crises.

Technical Analysis

The behavior of the riyal against the dollar has maintained stability. Technical analyses reveal that, during the period from 2010 to 2025, the riyal has experienced few significant movements relative to the dollar, indicating a coherent monetary policy and solid fiscal control.

Geopolitical Impact and Future Projections

The Fall of Bashar al-Assad

The recent fall of Bashar al-Assad in Syria has altered the geopolitical dynamics in the Middle East. Saudi Arabia is now seeking to consolidate its influence in the region through strategic alliances and promoting new governments that align with its interests.

The current power vacuum left by Iran has sparked a race against time between Turkey, which has a better position than Saudi Arabia; however, Riyadh has sent a clear message that it will politically strive to solidify its place in the Middle East.

The visit of the new president Al Golani to Saudi Arabia symbolizes a potential shift in relations between Syria and Saudi Arabia. This relationship could be key to managing conflicts in the region and fostering a more favorable economic environment for future investments. Collaboration in areas such as reconstruction and development could strengthen stability in both countries.

Conclusion

The economic development of Saudi Arabia is undergoing a paradigm shift. Economic diversification, sustained GDP growth, and the stability of the riyal are indicators of a promising future. Geopolitically, interaction with new leaders like Al Golani and the management of regional instability are factors Saudi Arabia must carefully handle. Projections for 2025 suggest an evolving country, ready to face future challenges with an inclusive and diversified growth strategy.

Sources

1. Saudi Vision 2030. (2016). Kingdom of Saudi Arabia. Retrieved from https://vision2030.gov.sa
2. International Monetary Fund (IMF). (2023). Saudi Arabia: 2022 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Saudi Arabia. Retrieved from https://www.imf.org/en/Publications/CR/Issues/2023/05/01/Saudi-Arabia-2022-Article-IV-Consultation-Press-Release-Staff-Report-and-Statement-by-the-Executive-Director-for-Saudi-Arabia-520204
3. World Bank. (2023). Economic Diversification in Saudi Arabia: Challenges and Opportunities. Retrieved from https://www.worldbank.org/en/country/saudiarabia/publication/economic-diversification-in-saudi-arabia
4. Alharbi, A. (2022). «The Role of Investment in Economic Diversification: Case of Saudi Arabia.» Journal of Economic Policy Reform, 25(3), 231-245.
5. Middle East Institute. (2023). «Saudi Arabia’s Evolving Foreign Policy: Implications for the Region.» Retrieved from https://www.mei.edu/publications/saudi-arabias-evolving-foreign-policy-implications-region