Structural Transformation and Impact of Oil Price Change in Saudi Arabia Economy: Input-Output Structural Decomposition Analysis

(Tahira Yasmin, Ghaleb A. El Refae and Shorouq Eletter)

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Abstract

Structural change and economic growth processes have various impacts on both the micro and macroeconomic levels. The current study aims to shed light on various aspects of sectoral changes in the Saudi Arabian economy due to oil price shocks, which have profound effects on economic growth in various sectors. This paper re-attempts to explore the various sectoral changes by using an input–output structural decomposition analysis for 2010 to 2015. The main focus is on changes in the economic structure of Saudi Arabia, which has been divided into three components –intermediate, technical, and total output – with different levels and plans. The main findings show that since 2010 there has been a remarkable change in the production process and sectoral performance. From a policy perspective, it seems that the economy has advanced fast enough and displayed changes oriented by new policies and diversification plans. Moreover, the economy may show dynamic sustainable economic development, especially with new fiscal plans. Educational development is also one of the key initiatives in Saudi Arabia to enhance economic performance with structural change.

KEYWORDS
diversification process, fiscal plans, intermediate demand, sustainable development

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