Government expenditure refers to the money the public sector or the government spends on providing services such as education and the acquisition of essential goods and services. It entails interest payments, transfer payments, and government consumption categories. In this connection, the government has been developing policies that will make the economy more diversified and thus more stable. The policies aim to strengthen other sectors of the economy to make them profitable enough to contribute to its exports. The government of Saudi Arabia has been formulating and implementing favorable policies that will attract investors and create manufacturing firms in the country.
The non-oil industry has not been taking part in developing the country's economy. The impact of other industries on the economy has not been felt as it should have. According to World Bank statistics from 2011 to 2013, the country's economic performance has been going down to fluctuating prices for oil in the world market. Other sectors in the industry have not been active enough to protect the nation's Gross Domestic Product from going down, as they are not well established. According to World Bank Information, the growth rate of Saudi Arabia from 2002 to 2013 has not been steady. The economy's stability depends on the value of products from Saudi Arabia in the international market. The country has had to invest more in its local manufacturing industries to guarantee stable economic growth. One sector the country has invested in to ensure the non-oil industry makes a significant contribution to the growth and development of the economy is encouraging entrepreneurs to set up non-oil commercial activities. Industrialists will help diversify the industry; in the process, more revenue will be generated, which will be used to develop the economy. The value of non-oil products has been increasing as entrepreneurs invest more in the industry, intending to produce high-quality goods that can compete with goods from other countries in the world market. Entrepreneurs are drivers of innovation, which will transform the economy, making it more vibrant, just like developed nations' economies. In this regard, this paper examines the impact of government expenditure on non-oil GDP in Saudi Arabia.
Table of Contents
1. Introduction
2. Literature Review
3. Impact of Agriculture on the Economy
Objectives and Themes
This paper aims to examine the impact of government expenditure on the non-oil gross domestic product (GDP) in Saudi Arabia. It explores how diversifying the economy through the development of non-oil sectors—specifically manufacturing, agriculture, mining, and trade—can ensure stable economic growth and reduce the kingdom's reliance on fluctuating oil revenues.
- Economic diversification strategies in Saudi Arabia.
- Evaluation of non-oil sectors: Agriculture, Manufacturing, Mining, and Trade.
- The influence of government expenditure on sustainable economic growth.
- Challenges to entrepreneurial development and non-oil commercial activities.
- Policy recommendations for supporting the non-oil industry.
Excerpt from the Book
Impact of Agriculture on the Economy
The agricultural sector in Saudi Arabia is not performing better to contribute to the country's exports significantly. The country imports more agricultural products than it exports. Many factors contribute to the nation's inability to produce enough agricultural produce for local consumption and export. Saudi Arabia faces some problems that limit the production and exportation of agricultural products (Hasanov et al., 2021). The biggest issue making the country not invest enough in agriculture is the acute water shortage. Saudi Arabia does not engage in too many farming activities that will ensure its surplus production to an extent it can export part of what it will produce. Many areas of the country are either arid or semi-arid, thus not favourable for farming. Farming does not thrive in hot and dry conditions, which are experienced in many parts of the country. The harsh environmental conditions and poor soils limit the size of the population that can take part in commercial agricultural activities (Butkiewicz & Yanikkaya, 2011).
Similarly, many people in the country are not accustomed to farming activities. More than ninety percent of the total population is not involved in commercial agricultural activities that will lead to the production of enough agricultural produce for export. Traditional agricultural areas are no longer productive due to changing environmental conditions such as the spread of desertification (Saad & Kalakech, 2009).
The ability of the country to export the grain in future is at risk, meaning proceeds from the export of wheat in future will be too minimal or not exist altogether. Saudi Arabia has banned the exportation of wheat from ensuring food security, reducing the importation of food products. It is also adopting the cultivation of crops that do not require a lot of water (Eid & Awad, 2017). The country is keen on increasing the size of land under cultivation. The nation is developing programs that will ensure more than eighty percent of water from underground and from its desalination plants is used for agriculture. The country also embraces technology in farming, intending to increase agricultural production (Hasnul, 2015).
Chapter Summary
Introduction: This chapter provides an overview of government spending and articulates the necessity of economic diversification in Saudi Arabia to stabilize the economy against fluctuating oil prices.
Literature Review: This section details specific metrics for measuring economic diversification, such as the Economic Complexity Index and Manufacturing Value-Added Gini, and critiques Saudi Arabia's current reliance on the oil sector.
Impact of Agriculture on the Economy: This chapter analyzes the obstacles facing the agricultural sector, including water scarcity and environmental conditions, while discussing initiatives to integrate technology and sustainable practices to boost local production.
Keywords
Government Expenditure, Non-Oil GDP, Saudi Arabia, Economic Diversification, Manufacturing, Agriculture, Mining, Economic Growth, Fiscal Policy, Entrepreneurship, Sustainability, Natural Resources, Export Earnings, Infrastructure, Public Investment
Frequently Asked Questions
What is the core focus of this publication?
The publication examines how government expenditure can be leveraged to stimulate the non-oil sectors of the Saudi Arabian economy, thereby reducing dependence on oil revenue and fostering stable growth.
What are the primary sectors discussed in the text?
The document highlights the agricultural, manufacturing, mining, and trade and tourism sectors as vital areas for economic diversification.
What is the author's primary research goal?
The primary goal is to determine the extent to which government initiatives and investments in non-oil commercial activities impact the national economy and overall GDP stability.
Which methodology is employed in the work?
The work utilizes an economic analysis approach, citing empirical studies and utilizing indices such as the Economic Complexity Index and IMF Diversification Index to evaluate the country's economic status.
What is covered in the main body of the text?
The text provides a background on government budget allocation for social services, evaluates the effectiveness of current diversification indices, explores the specific constraints and potentials of the agricultural industry, and looks at the growth trends in mining and manufacturing.
Which keywords define the research?
Key terms include government expenditure, non-oil GDP, economic diversification, fiscal policy, and sustainable growth within the context of the Saudi Arabian economy.
Why is water scarcity described as a critical challenge for the Saudi agricultural sector?
Water scarcity is identified as the primary barrier preventing the expansion of commercial farming, forcing the government to prioritize water-extensive technology and desalination efforts for agriculture.
How does the government currently support the mining industry?
The government supports mining by providing policies that reduce corporate tax liabilities for mining firms and allowing the duty-free import of specialized mining equipment to attract investment.
- Quote paper
- Gabby Ian (Author), 2022, The impact of government expenditure on non-oil GDP in Saudi Arabia, Munich, GRIN Verlag, https://www.grin.com/document/1239590
