Saudi Arabia’s economy is facing significant pressure from declining oil prices. This downturn threatens the ambitious goals set by the country’s Vision 2030 plan and could lead to serious financial problems, including increased borrowing and a potential budget deficit that is not threatened by UK sites not on GamStop.
Background of Saudi Arabia’s Economy
Saudi Arabia relies heavily on oil. The country is the world’s biggest oil exporter, and oil revenue makes up:
- 90% of export earnings
- 80% of the government budget
- 40% of GDP
This dependency has serious consequences. Politically, it means limited job opportunities outside the oil industry. To keep unemployment low, the government hires around two-thirds of working Saudis. Economically, heavy oil reliance weakens other industries, creating an imbalance known as “Dutch Disease.”
Moreover, oil prices are volatile. Between 2007 and 2011, prices doubled, halved, doubled again, and then fell dramatically, reaching negative levels briefly in 2020.
Vision 2030: Reducing Dependence on Oil
In 2016, Crown Prince Muhammad bin Salman announced Vision 2030. The goal was to diversify the Saudi economy quickly. The plan focused on two areas:
- Boosting exports: Increasing industries like tourism, mining, and manufacturing.
- Growing domestic economy: Investing in education, infrastructure, and small businesses.
Targets for 2030 include:
- The private sector to represent 65% of GDP.
- Non-oil exports to reach 50%.
- Renewable energy to provide 50% of electricity.
The timeline for these goals is very short compared to other countries, like Norway, which took decades to diversify.
Saudi Arabia’s £80-£100 Oil Strategy
To fund Vision 2030, Saudi Arabia needed higher oil prices, around £80-£100 per barrel. Before the COVID-19 pandemic, prices averaged around £48 per barrel (approximately £60). Saudi Arabia aimed to increase this to ensure sufficient income for their ambitious plans.
They relied on the OPEC+ cartel, which includes Russia, to control global oil supplies and influence prices. However, prices stabilised around £64 (approximately £80) after the pandemic, mainly due to increased oil production from non-OPEC countries and actions by the Biden administration, which released strategic oil reserves to lower prices.
This situation frustrated Saudi Arabia. Other OPEC+ members, including Iraq and the UAE, produced more oil than agreed, undermining Saudi efforts. This forced Saudi Arabia to reduce its production drastically, causing short-term revenue losses.
Impact of Falling Oil Prices
Recently, oil prices have dropped significantly to around £48 per barrel (approximately £60). This decrease is partly due to lowered demand forecasts after the “Liberation Day” events led by former US President Donald Trump.
The financial impact on Saudi Arabia is severe:
- Goldman Sachs predicts a budget deficit of around £53 billion this year, double the initial government estimate.
- The Saudi Finance Ministry confirmed borrowing £24 billion in the first quarter of 2025 alone—the highest quarterly borrowing ever.
- Continuing this borrowing rate would lead to an annual deficit of approximately £96 billion, about 11% of Saudi GDP.
Financial Health of Saudi Arabia (2025 Projection)
| Factor | Projected Amount |
| Quarterly Borrowing | £24 billion |
| Annual Deficit (2025) | £96 billion |
| Deficit (% of GDP) | 11% |
| Debt to GDP Ratio | 30% |
Saudi Arabia still maintains significant cash reserves, and its current debt-to-GDP ratio of around 30% remains manageable. However, prolonged low oil prices could force the country to use more reserves, which primarily support the Saudi Riyal’s peg to the US dollar.
Challenges Facing Vision 2030
Persistent low oil prices could severely affect Vision 2030. Many flagship projects have already faced delays and cost overruns. Prominent examples include:
- Neom Line City: A futuristic city facing multiple delays.
- Saudi Football League: Investments to attract international attention, now strained financially.
Foreign investment has also reduced significantly due to economic uncertainty. If oil prices remain low, Crown Prince Muhammad bin Salman might need to scale back or abandon major parts of Vision 2030.
Potential Outcomes and Risks
The primary risks for Saudi Arabia if low prices continue include:
- Reduced foreign reserves and increased borrowing costs.
- Significant scaling down or complete abandonment of Vision 2030 projects.
- Continued economic reliance on oil, leading to ongoing vulnerability.
The kingdom currently faces no immediate threat of default, despite insurance costs against Saudi debt default reaching their highest since 2020. However, sustained financial pressure could trigger economic instability.
Understanding Media Coverage
Accurate reporting on Saudi Arabia’s economic situation and oil price strategies is challenging. Reports often reflect political biases. For instance, left-leaning outlets emphasise geopolitical and environmental impacts, while right-leaning sources highlight economic effects like deflation.
Media Reporting on Saudi Oil Cuts
| Political Leaning | Focus Areas |
| Left-Leaning | Geopolitical, environmental impacts |
| Right-Leaning | Economic impacts, deflation |
Understanding these biases helps readers critically assess the news. Tools like Ground News offer valuable insights by displaying media biases, allowing readers to better evaluate different viewpoints.
Conclusion
Saudi Arabia’s economy faces significant challenges due to its dependence on oil. Vision 2030 represents a major attempt at diversification but has become increasingly difficult to achieve amid falling oil prices. Unless market conditions improve, the kingdom may need to significantly adjust its economic strategy.
Frequently Asked Questions (FAQ)
Why does Saudi Arabia rely heavily on oil?
Saudi Arabia’s economy depends on oil as it generates most of the country’s income through exports, government revenues, and economic output.
What is Vision 2030?
Vision 2030 is Saudi Arabia’s plan to diversify its economy and reduce dependence on oil by developing other sectors like tourism, mining, and renewable energy.
Why did Saudi Arabia aim for higher oil prices?
Higher oil prices were necessary to fund the ambitious goals of Vision 2030, which requires substantial investment in new sectors and infrastructure.
What has caused recent oil prices to fall?
Prices have fallen due to reduced global demand forecasts and increased oil supply from non-OPEC producers and strategic reserves releases by the US.
How has falling oil prices affected Saudi Arabia?
Falling oil prices have significantly increased Saudi Arabia’s budget deficit and forced the government to borrow heavily, threatening financial stability.
Can Saudi Arabia still achieve Vision 2030?
Achieving Vision 2030 is uncertain if oil prices remain low, as the funding needed for key projects and economic reforms is now under threat.
