The Saudi Economy Has Managed to Hold Ground Amidst the Iran War!
The war in Iran is not an exception in the lives of citizens of Saudi Arabia, and their country was affected by this conflict too. However, there are some positive aspects regarding this influence. Firstly, oil prices have been rising due to the Iran situation, but Saudi Arabia can be considered the safest player in the region as it has alternative ways of exporting oil, along with being a country that possesses a great amount of oil itself and having a rapidly growing non-oil sector.
As Saudi Arabia was influenced by this Iran war, oil prices are increasing, and risks are raising. In fact, Saudi media reported several times on energy market volatility since the beginning of the conflict. For example, according to Saudi Gazette, there were fluctuations in March when Brent oil prices approached $120 per barrel. Later, the situation got better because of some optimism regarding a potential ceasefire agreement.
However, such volatility means more challenges for Saudi Arabia. It cannot be argued that high oil prices might benefit the Saudi economy because higher prices will increase revenue. However, if the global economy will slow down or shipping costs will increase due to the conflict, things will become difficult for the Kingdom.
Saudi Arabia’s Advantage Over Its Competitors:
What sets Saudi Arabia apart from other Gulf countries is that the Kingdom can diversify its export routes. According to Arab News, the International Monetary Fund praised Saudi Arabia for that because its diversification helped stabilize the global energy market. Argaam reported that officials in the Kingdom claim Saudi Arabia still possesses resilient infrastructure for energy exports thanks to multiple export routes, especially in the Red Sea.
While Saudi Arabia possesses some advantages over other countries in this situation, the war still negatively affects the region and leads to economic challenges. However, the International Monetary Fund expects the country to develop, as it was noted by Arab News. According to the organization, Saudi Arabia is predicted to develop at the rate of 3.1 percent in 2025 despite the challenges it faces.
But the economy of the country started developing even before oil prices rose. For example, according to SPA, real GDP grew by 4.5 percent, and non-oil activities increased by 4.9 percent.
The Non-Oil Sector Is Key for Long-Term Success
The best thing about Saudi Arabia today is its non-oil exports and their growth rates. SPA announced that the country managed to generate non-oil exports worth SAR624 billion, which was $171.1 billion. Also, according to SPA, non-oil exports grew by 13 percent and service exports grew by 15 percent.
Saudi Arabia’s Vision 2030 plan aims to transform the country into the place with diverse economics that can provide financial stability in case of the decline in oil price. War is beneficial for Saudi Arabia now, but the country is working on making itself immune to changes in the price of crude oil.
It is possible to conclude that while there are some challenges for Saudi Arabia due to the Iran war, there are also several positives for it. The Kingdom’s diversified export routes, as well as rapid growth of non-oil exports, are very important in this context.
Arab News: IMF sees Saudi growth despite regional war risks
https://www.arabnews.com/
Saudi Press Agency (SPA): Saudi GDP growth and non-oil expansion
https://www.spa.gov.sa/en
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