Saudi Arabia, a nation abundant in oil reserves, continues to face economic challenges under the leadership of Crown Prince Mohammed bin Salman. Despite the wealth generated from its vast oil resources, the Saudi economy has been shrinking, with the second quarter of 2024 marking the fourth consecutive quarter of economic contraction. This ongoing downturn raises questions about the effectiveness of bin Salman’s economic policies and leadership.
A Persistent Economic Decline
According to official data, Saudi Arabia’s Gross Domestic Product (GDP) shrank by 0.4% year-on-year from April to June 2024. This decline is largely attributed to an 8.5% contraction in the oil sector, a significant driver of the nation’s economy. The continued reduction in oil production by the OPEC+ alliance further exacerbates the economic slowdown.
Unsuccessful Economic Diversification
Bin Salman’s ambitious Vision 2030 aims to diversify the Saudi economy and reduce its dependence on oil by expanding non-oil sectors and creating job opportunities for citizens. However, these initiatives have not yielded the desired results. Unemployment rates remain high, and many recent graduates struggle to find employment. The promise of a thriving non-oil economy has yet to materialize, leaving many Saudis grappling with poverty.
Mounting Budget Deficits
The Saudi government’s financial struggles are evident in the growing budget deficits. In the first quarter of 2024, the deficit reached approximately 12.387 billion riyals (about $3.3 billion). The situation worsened in the second quarter, with the deficit climbing to 15.341 billion riyals ($4.09 billion). Although oil revenues increased by 18% in the second quarter compared to the previous year, government spending also surged by 15%, reaching 368.932 billion riyals.
IMF’s Downgrade and Economic Mismanagement
The International Monetary Fund (IMF) has downgraded its growth forecast for Saudi Arabia’s GDP in 2024 from 2.6% to 1.7%. This adjustment reflects concerns over economic mismanagement and the lack of a clear, effective strategy to navigate the country’s financial challenges. The IMF’s revised outlook underscores the growing skepticism about bin Salman’s ability to steer the economy toward sustainable growth.
Falling GDP Per Capita and Rising Unemployment
The economic struggles are further highlighted by the decline in GDP per capita. In 2023, GDP per capita fell by 8.5% compared to 2022, signaling a decline in the average economic well-being of Saudi citizens. Unemployment remains a pressing issue, with male unemployment rates standing at 4.6% between the third and fourth quarters of 2023, higher than the 4.2% rate in the fourth quarter of 2022.
Youth Disengagement and Vision 2030’s Unfulfilled Promises
One of the most troubling trends is the disengagement of Saudi youth from the labor market. Many young Saudis are reluctant to join the workforce, leading to a significant drop in labor market participation. Vision 2030, which promised to reduce unemployment, has failed to deliver tangible results. The unemployment rate for young people, which was 16.1% in 2015, soared to 25% by mid-2021, dashing the hopes and dreams of many Saudi youths.
The economic challenges facing Saudi Arabia under Crown Prince Mohammed bin Salman’s leadership are profound. The persistent economic contraction, rising budget deficits, and high unemployment rates paint a bleak picture of the nation’s economic health. As Vision 2030’s promises to remain unfulfilled, the need for effective and transparent economic management has never been more critical. The future of Saudi Arabia’s economy depends on addressing these challenges head-on and implementing strategies that truly benefit its citizens.
