Economic Environment of Saudi Arabia Assignment

Economic Environment of Saudi Arabia - Assignment Example The Saudi government encourages foreign investors and the private sector to participate in telecom sectors and the generation of power. The Saudi government also tried to diversify its economy and attract foreign investors by signing the 2005 WTO agreement after several years of concession. The high revenue from oil has enabled the Saudi government to have huge budget surplus and Riyadh has been able to assist in infrastructure development, government salaries and education. The score for the economic freedom of Saudi Arabia is 60.6 and this makes it the 82nd freest in the index of 2013. This score is 1.0 points worse compared to last year because of considerable reduction in trade freedom, property rights, corruption freedom and business freedom. It is ranked 8th of the 15 countries in the Middle East and its score is above the world average. The major drivers of the economy of Saudi Arabia is oil and expansionary. The economy of Saudi Arabia has increased at an average rate of 3.5 percent in the past five years. However, there has been a slow progress in the institutional and structural reform. Saudi Arabia has experienced a decline in economic freedom for the last two years. The legal system has remained vulnerable to political influence because of the increased level of corruption. The property rights score is currently below the world average. ... A lot of this expectation was to emerge from the high oil output, energy prices and augmented state expenditure. In 2013, the growth is expected to be average. Local financial groups have estimated that the GDP would expand from 3.3 to 3.5 percent this year because of the ease of energy demands. The stance for non oil sector is viewed as stronger with an expectation of augmentation from 5 to 9 percent (Sasson, 37). While Saudi Arabia’s economy increased in 2013, prices stayed in check. Inflation lingered on 3.6 percent at the end of the year, but this was expected to increase in 2013 if the consumer demand increases, while the outcomes of higher disposable earnings come in. The increase in production of crude oil plus the increase in oil prices has put Saudi Arabia on the track to produce yearly revenue for the energy section. The figures of Riyadh-based Jadwa investments showed that income could attain an annual high of $288 billion in 2012. Al Rajhi Capital reported that the production of oil was much higher than anticipated and it could go up to 8.8m barrels everyday for the first ten months during the year. This is greater that the initial anticipation of 9.45m barrels per day. However, as augmented capacity is experienced in North Africa and the Middle East, with Libya anticipated getting back to optimum production and Iraq also improving on exports, Saudi Arabia may reduce to 9m barrels per day. However, the increasing local demand may need higher output and also consume the export revenues in the years to come. Meanwhile, the construction industry is expected to be quite busy in 2013. Since the government is expected to resolve the scarcity of low-cost housing, this promises to put in 500,000 units to