Saudi Arabia’s drive towards economic diversification has entered a critical phase. After years of articulating a vision for the development of a knowledge-based economy, the government is making a serious attempt to bring about lasting economic change. This transformation is needed to ensure that the country's growth trajectory meets its longer term challenges, including generating sufficient levels of private sector jobs, boosting worker productivity and diversifying government revenues.
With the prospect of long-term fiscal deficits looming, the incentive to change is high. “The Saudis are going to have to adjust to a sub-$100[-a-barrel] oil environment and they are looking at another double-digit fiscal deficit this year, as well as sizeable deficits for the next few years,” says James Reeve, deputy chief economist of Riyadh-based Samba Financial Group.
