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Saudi Economic Report 2014 (SECOR)

MAY 2015

In the Name of Allah the


Compassionate the Merciful

Preface

Praise be to Allah the Almighty, and God's Peace and Blessings


be upon the Prophet and his progeny and his companions.
It gives me pleasure to introduce this edition of the Saudi
Economic Report. The report is compiled by the ministry of
economy and planning, and is intended to provide significant
information on performance of the Saudi economy to readers

Adel M. Fakieh
Minister of Economy and
Planning

with interest in keeping abreast with economic developments.


The report year, 2014, marks the last year of the Ninth
Development Plan (2010-2014). In essence, the Saudi Economic
Report provides an analytical review of developments of the
Saudi economy in 2014. The report highlights developments in
various areas of the domestic economy, such as performance of
the Saudi Economy, prices and cost of living, manpower and
foreign trade, oil market, public finance, and Saudi Arabia's
listing in global indicators. In addition, the report offers a
summary of key developments and forecasts of the global
economy. The report relies mainly on data of the Central
Department of Statistics and Information (CDSI) as well as on
data from other sources in areas not covered by CDSI.
Data reveal that the Saudi economy continues to achieve
remarkable growth rates. Against a backdrop of declining
growth of global economy and collapse of world oil prices,

Saudi Arabia's real GDP grew by 3.47% in 2014, compared to


For more information on the
contents and data, please contact
the authors of the report:

2.67% a year earlier.


Another positive note in 2014 has been the increase in domestic
refining capacity, as large scale refineries came into stream,
leading to a fast growth of 12.53% in refining activity, with

Dr. Imtithal A. Al Thumairi


(Ph.D in Economics, York University)
Economic Advisor, Ministry of Economy
and Planning
Email: thumairi@mep.gov.sa
Pages: (1-72)

ensuing advantages to the economy. On the other hand,


inflationary pressures receded, and employment of Saudi
nationals in private sector businesses gained momentum.
While the current account dropped due to lower revenues of oil
exports, Saudi Arabia's non-oil exports grew by 8.4%.
Remittances by expatriates living in the kingdom saw a
considerable drop in 2014, compared to their earlier level in
2013.

Dana A. Al Deraa
(MA degree in Economics, KSU)
Economic Researcher, Ministry of Economy
and Planning
Email: Dderaa@mep.gov.sa
Pages: (73-101)

As the reader will notice, the information and indicators


contained in this report have been presented in statistical
analysis format, which highlights quantitative dimensions and
real implications, along with key factors behind developments.
This accomplishment was made possible thanks to the
ministrys expert staff, aided by adequate data bases and

Tel. No: +966 114011444


Fax. No: +966 114014574
P. O. Box 853 Riyadh 11182
Kingdom of Saudi Arabia
www.mep.gov.sa

advanced statistical software packages.


I pray to Allah the Almighty to guide us towards achievement of
our goals and to raise the ministry to the expectations of the
Custodian of the Two Holy Mosques, the leader of our
procession, the Crown Prince and the Deputy Crown Prince, may
Allah guide their steps. I also wish to express my appreciation to
H.E the Vice Minister, Mr. Mohamed Saleh Al Daham, and the
work team, for the fruitful efforts they exerted, may Allah the
Almighty grant us sincerity in both words and deeds.

Contents
THE MOST IMPORTANT ECONOMIC INDICATORS ...................................................................................... 5
Introduction ..................................................................................................................................................... 6
1. Performance of the Saudi Economy ........................................................................................................... 12
FIRST: Impacts of Changing the Base Year Used For Estimation of GDP from 1999 to 2010: ....................... 13
SECOND: Growth Rates and Contribution of the Private and Oil Sectors to Growth of the GDP................ 16
THIRD: Growth Rates of Activities of the Economy...................................................................................... 18
FOURTH: Per Capita GDP .............................................................................................................................. 22
FIFTH: Spending on GDP ................................................................................................................................ 23
Shaded Text No. 1: The Kingdom`s Refineries .............................................................................................. 24
2. Prices and Cost of Living............................................................................................................................. 26
FIRST: Cost of Living Index ............................................................................................................................. 26
SECOND : Wholesale Price Index................................................................................................................... 29
THIRD: GDP Deflator ..................................................................................................................................... 30
FOURTH: Prices of Construction Materials ................................................................................................... 31
FIFTH: Prices and Inflation Rate in Foodstuff and Housing .......................................................................... 32
SIXTH: Comparison of International Foodstuff Prices with Foodstuff Prices in the KSA ............................. 33
SEVENTH: Imports and Inflation Rates of Trade Partners ............................................................................. 35
Shaded Text No. 2: Methodology of Calculating Foodstuff Price Indices .................................................... 38
3. Labour force................................................................................................................................................ 40
FIRST: Saudi Population in the Working Age................................................................................................. 42
A. Saudi Labor Force ....................................................................................................................................... 43
B. Comparison of Saudization Ratios for 2013 and 2014 .............................................................................. 49
C. Saudi Population Out of the Labor Force .................................................................................................. 50
SECOND: Unemployment .............................................................................................................................. 51
4.Foreign Trade .............................................................................................................................................. 54
FIRST: Merchandise Exports of the Kingdom ................................................................................................ 54
SECOND: Imports by Main Components....................................................................................................... 56
THIRD: Exports and Imports to and From the ten Main Trade Partners of the Kingdom ............................ 57
FOURTH: Non-oil Exports of the Kingdom .................................................................................................... 59
FIFTH: Balance of Current Account ............................................................................................................... 60
SIXTH: External Transfers oth the Expatriate Labor Residing in the Kingdom ........................................... 61
5. Oil Market .................................................................................................................................................. 63
FIRST: Oil Prices ............................................................................................................................................. 64
SAUDI ECONOMIC REPORT 2014 , (SECOR)

Contents
SECOND: World Oil Production..................................................................................................................... 66
THIRD: World Demand for Oil ....................................................................................................................... 69
FOURTH: Kingdom's Oil Production and Consumption ............................................................................... 71
6. Public Finance ............................................................................................................................................ 74
FIRST : Public Finance .................................................................................................................................... 74
SECOND: Public Revenues for 2014 .............................................................................................................. 76
THIRD: Public Expenditure for 2014 .............................................................................................................. 77
FOURTH: Public Debt .................................................................................................................................... 81
7. Ranking of the Kingdom international Indices ......................................................................................... 83
FIRST: Global Competitiveness Index............................................................................................................ 83
SECOND: World Prosperity Index .................................................................................................................. 85
THIRD : Energy Sustainability Index .............................................................................................................. 86
FOURTH: Doing Business Index..................................................................................................................... 87
FIFTH: Future Perspectives of Sovereign ....................................................................................................... 89
SIXTH: Knowledge Economy Index ................................................................................................................ 89
SEVENTH: Global Innovation Index ............................................................................................................... 90
EIGHTH: E-Government Transaction Index ................................................................................................... 92
Shaded text No. 3: Components of Global Competitiveness Index .............................................................. 94
8. World Economy .......................................................................................................................................... 96
FIRST: Gross Domestic Product ..................................................................................................................... 96
SECOND: Inflation ......................................................................................................................................... 98
THIRD: Unemployment ............................................................................................................................... 100
FOURTH: International Trade ...................................................................................................................... 101

SAUDI ECONOMIC REPORT 2014 , (SECOR)

Tables
Table )1( : GDP Growth Rate by Institutional Sectors at 2010 Constant Prices ........................................................... 13
Table )2( : Gross Domestic Product Growth Rate by Economic Activity at 2010 Constant Prices .............................. 18
Table )3( : Per Capita GDP............................................................................................................................................... 22
Table )4( : Expenditure on Gross Domestic Product at Current Prices ......................................................................... 23
Table )5( : Cost of Living Indices by Main Spending Sections ....................................................................................... 28
Table )6( : Annual Average of Wholesale Price Index .................................................................................................... 29
Table )7( : GDP Deflator .................................................................................................................................................. 30
Table )8( : Average Prices of Some Construction Materials .......................................................................................... 31
Table )9( : Saudi Population Within and Outside Labour Force ................................................................................... 42
Table )11( : Saudi Labour Force by Education Status ................................................................................................... 43
Table )11( : Employed Saudis by Economic Sectors ....................................................................................................... 46
Table )12( : Saudi Population out of Labor Force by Status .......................................................................................... 50
Table )13( : Unemployment Among Saudis ................................................................................................................... 51
Table )14( : Merchandise Exports of the Kingdom ........................................................................................................ 55
Table )15( :Imports of the Kingdom by Main Components........................................................................................... 56
Table )16( : Exports of the Kingdom to the ten main trade partners............................................................................ 57
Table )17( : Imports of the Kingdom from the ten main trade partners ....................................................................... 58
Table )18( : Non-Oil Exports of the Kingdom to the ten main trade partners .............................................................. 59
Table )19( : Current Account ........................................................................................................................................... 60
Table )21( : Oil Prices ...................................................................................................................................................... 64
Table )21( : Average World Oil Production .................................................................................................................... 66
Table )22( : World Oil Demand ....................................................................................................................................... 69
Table )23( : Local consumption of Refined Products, Crude Oil and Natural Gas ....................................................... 72
Table )24( : Public Finance by Sectors ............................................................................................................................ 75
Table )25( : Distribution of Budget Allocations for the Fiscal Year 1435/1436H (2014) by Sectors ......................... 78
Table )26( : Public Debt as a Percent of GDP .................................................................................................................. 81
Table )27( : Kingdom`s Performance according to Global Competitiveness Indices ................................................... 84
Table )28( : Ranking of Countries According to the Prosperity Legatum Index in 2014 .............................................. 85
Table )29( : Ranking of Countries According to the Energy Sustainability Index ........................................................ 86
Table )31( : Kingdom's Ranking in sub-indices of Doing Business Index..................................................................... 87
Table )31( : Kingdom's Ranking According to Global Innovation Index ....................................................................... 91
Table )32( : Kingdom's Ranking According to E-Government Transactions Index ...................................................... 92
Table ( 33( : Overall Assessment of EGDI (2014)........................................................................................................... 93
Table )34( : Real growth rates of GDP............................................................................................................................. 96
Table )35( : Inflation Rate (%) ......................................................................................................................................... 98
Table )36( : Rates of Unemployment (As a Percent of Labor force) ............................................................................ 100
Table )37( : Growth Rates of International Trade (%)................................................................................................. 101
SAUDI ECONOMIC REPORT 2014 , (SECOR)

Figures
Figure )1( : Effect of Changing the Base Year on the % Shares of Institutional Sectors & Economic Activities .................... 14
Figure )2( : Effects of Changing the Base Year on Real GDP and its Rate of Growth .............................................................. 15
Figure )3( : Rates of Growth and Contribution of the Private and Oil Sectors to Growth of the GDP .................................. 17
Figure )4( : Contribution of Economic Activities to Growth of GDP........................................................................................ 20
Figure )5( : Iron and Cement Prices (2014) ............................................................................................................................... 31
Figure )6( : Inflation in Foodstuff and Housing ........................................................................................................................ 32
Figure )7( : Comparison of Foodstuff Prices in the Kingdom with International Indices (Annual Change) ........................ 33
Figure )8( : Correlation between international foodstuff prices and foodstuff prices in KSA.............................................. 34
Figure )9( : Inflation Rates of Trade Partners ........................................................................................................................... 36
Figure )11( : Prices of the Kingdom's foodstuff imports ........................................................................................................... 37
Figure )11( : Economic Participation Rate of Saudis................................................................................................................. 42
Figure )12( : Saudi Labor Force by Age Group (2014) .............................................................................................................. 43
Figure )13( : Employed and Unemployed Saudis Holders of Secondary, University Degrees and Above (Comparison).... 44
Figure )14( : Employed non-Saudis by Education Level............................................................................................................ 45
Figure )15( : Percentage Distribution of New Entrants to the Labor Market ......................................................................... 47
Figure )16( : Percentage Distribution of Employed Saudis and non-Saudis by Professions (2014) ...................................... 48
Figure )17( : Saudization ratios in Economic Sectors ................................................................................................................ 49
Figure )18( : Unemployment Rate Among Saudis..................................................................................................................... 52
Figure )19( : Exports, Imports and Balance of Current Account .............................................................................................. 55
Figure )21( : Exports and Imports to and from the Kingdom and the Ten Main Trade Partners .......................................... 58
Figure )21( : Ratio of Non-Oil Exports to Imports .................................................................................................................... 59
Figure )22( : Transfers of Expatriate Labor and Rate of Annual Change ................................................................................ 61
Figure )23( : Oil Prices ................................................................................................................................................................ 65
Figure )24( : World Oil Production ............................................................................................................................................ 67
Figure )25( : Growth of Oil Production in Selected Countries from OPEC and USA ............................................................... 68
Figure )26( : World Oil Demand ................................................................................................................................................. 70
Figure )27( : Local Consumption of Oil ..................................................................................................................................... 71
Figure )28( : Budget Performance .............................................................................................................................................. 74
Figure )29( : Public Revenues ..................................................................................................................................................... 76
Figure )31( : Public Expenditure ................................................................................................................................................ 77
Figure )31( : Distribution of Budget Allocations of the Year 1435/1436 (2014) by Key Sectors............................................ 80
Figure )32( : Public Debt ............................................................................................................................................................. 81
Figure )33( : Ranking of Countries According to Global Competitiveness indices in 2014/2015 .......................................... 83
Figure )34( : Ranking of Countries According to Doing Business Index (2015) ..................................................................... 88
Figure )35( : Ranking of Countries According to Knowledge Economy Index for 2012 ......................................................... 89
Figure )36( : GDP Growth Rate in Global Economies (1995-2015).......................................................................................... 97
Figure )37( : Global Inflation Rates )2115-1995( ...................................................................................................................... 99

SAUDI ECONOMIC REPORT 2014 , (SECOR)

THE MOST IMPORTANT ECONOMIC INDICATORS


2013

2014

Real GDP growth rate (%)

2.67

3.47

Oil sector growth rate (%)

-1.63

1.49

Non-oil sector growth rate (%)

6.38

5.00

Private sector growth rate (%)

6.95

5.58

Government sector growth rate (%)

5.09

3.68

Total exports (Trillion Riyals)

1,45

1,32

Oil exports (Trillion Riyals)

1,21

1,06

Non-oil exports (Billion Riyals)

172,1

186,6

Non-oil exports relative to GDP (%)

6.17

6.67

Total imports (Billion Riyals)

862,1

957,6

Current account balance (Billion Riyals)

507,9

288,4

Surplus relative to GDP (%)

18.20

10.30

The performance of the Saudi economy

Foreign Trade

Population and labor force


Population in Saudi Arabia ( Million People)

29,9

30,7

The number of Saudi entrants to the labor market (Thousand Person)

339,436

237,829

The number of Saudis went out of the labor force (Thousand Person)

98,226

99,498

Saudis unemployment rate (%)

11.7

11.7

Employment in the government sector growth rate (%)

6.40

3.27

Employment in the private sector growth rate (%)

13.50

14.18

Inflation rate (%)

3.5

2.7

Inflation rate in the housing category (%)

3.4

3.4

Inflation rate in the food category (%)

5.7

3.3

Inflation rate in the transport and communication category (%)

2.2

-0.34

3094.4

2903.8

14.2

13.91

Average price of Arab Light oil ($\ barrel)

106.53

97.18

Average price of Brent ($\ barrel)

108.62

99.08

Average world oil demand (Million barrels \ day)

90.24

91.2

Average world oil supply (Million barrels \ day)

90.07

92.22

Average saudi oil production (Million barrels \ day)

9.59

9.68

Total Revenues (Billion Riyals)

1,156

1,046

Total Expenses (Billion Riyals)

976

1,100

Surplus / deficit (Million Riyals)

180,347

-54,000

Surplus / deficit ratio to GDP (%)

6.46

-1.91

60,118

44,260

2.15

1.57

Prices and cost of living

Steel prices (Riyal per ton)


Cement prices (Riyal bag of 50 kg)

Oil indicators

Public Finance

Public debt (Million Riyals)


Ratio of public debt to GDP (%)

SAUDI ECONOMIC REPORT 2014 , (SECOR)

Introduction
The Saudi economy achieved a

The Saudi economy achieved a remarkable growth in 2014, as the real GDP

remarkable growth in 2014, as the

grew by 3.47%, compared to 2.67% in 2013. The rise in real GDP growth is due

real GDP grew by 3.47%, compared

to two major factors, First: The increase in average oil output level by 0.8%. In

to 2.67% in 2013.

this respect, the kingdom's oil production increased from 3,517 billion barrels
in 2013, to about 3,545 billion barrels in 2014, according to data of the ministry

Increase of oil production in 2014

of petroleum and mineral resources. Second: The fast growth of oil refining

led to the growth of oil sector, while

activity, which grew by 12.53% in 2014. Activity in this sector achieved

non-oil sector slackened.

considerable gains as large refineries came into stream, including SATORP in


Jubail and YASREF in Yanbu, leading to increased domestic refining capacity in
the Saudi economy.

The slowdown of private sector

However, as oil production increased in 2014, with the resulting rise of oil

growth

sectors

sector GDP compared to a year earlier, non-oil sector GDP experienced a

continued reliance on government

slowdown compared to its growth rate in 2013. The decline in non-oil sector

expenditure and the correlation

GDP growth was due to the lower growth of both the government and private

between the sectors growth and

sectors.

reflects

the

expenditure by the government.


Even with that slowdown, the

The slowdown of private sector growth reflects the sectors continued reliance

private sector accounted for the

on the government expenditure and the correlation between the sectors

largest share in the countrys GDP

growth and expenditure by the government. Even with that slowdown, the

growth in 2014.

private sector accounted for the largest share in the countrys GDP growth in
2014, with a share of 2.16% compared to 0.64% for the oil sector. The
government sector accounted for the remaining share in GDP growth.

Inflationary pressures saw a


slowdown in 2014, at an inflation
rate of 2.7%, compared to 3.5% in
2013.

Inflationary pressures in the Kingdom witnessed a slowdown in 2014, at an


inflation rate of 2.7%, compared to 3.5% in 2013. External and domestic factors
can be traced for the decline of inflation in the Kingdom. Among the external
factors, there was the worldwide appreciation of the US Dollar, resulting in the
appreciation of the Saudi Riyal against most major world currencies in 2014,
plus the decline of world food prices.

SAUDI ECONOMIC REPORT 2014 , (SECOR)

Introduction (Continued)
Domestic factors, on the other hand, include stability of inflation rate of rents,
which constitutes the largest sub-component of the housing sector, coupled
with slowdown of inflation of food and beverages, in addition to moderation of
inflation in the transport and communication sector and slowdown of growth in
Food prices in the Kingdom show a

the non-oil sector. These external and domestic factors led to a decline of overall

rising trend since 2008. Obviously,

inflation rate in the Kingdom in 2014.

prices have not fallen down since


their peak in that year.

Food prices in the Kingdom have shows a rising trend since 2008. Obviously,
prices have not fallen down since their peak in that year despite the decline in
world food prices. Prior to 2008, a strong correlation existed between
worldwide and domestic food prices. However, such correlation fluctuated
after 2008 and eventually ceased to exist. In fact, food prices in the Kingdom
chart a trend of its own and no longer follow the worldwide trend .
Growth of private sector employment accelerated in 2014 by 14.18%,
compared to 13.50% a year earlier. However, government sector employment
grew by 3.28%, compared to 6.40% in 2013. The increase in private sector

Private sector employment grew in

employment can be attributed to policies pursued to reform the Kingdoms

2014 by 14.18%, while government

labor market, which resulted in increased employment of Saudi nationals in the

sector employment grew by 3.28%.

private sector. A look at employment data in both the government and private
sector in 2013 and 2014 reveals that the number of Saudi nationals employed
by the private sector has increased considerably, from 1.09 million in 2013 to
1.25 million in 2014. The increase was however much lower in the government
sector where the number of Saudi nationals went up from 3.15 million in 2013
to 3.25 million 2014. However, despite the obvious increase of Saudi nationals
employed by the private sector, unemployment remained constant at 11.7 % in
2013 and 2014 respectively .

SAUDI ECONOMIC REPORT 2014 , (SECOR)

Introduction (Continued)
The private sector has a limited
capability

to

solve

the

unemployment problem in the


Kingdom. Most jobs offered by the

A study of present conditions of the labor market and data of CDSI manpower
survey shows that the private sectors current structure is to be blamed for its
limited capability to solve the unemployment problem. This is due to two
reasons. First: The majority of jobs offered by the private sector are unskilled

private sector are for unskilled

jobs that do not require high educational level. Thus substitution of expatriate

labor, while the majority of national

workers by Saudi manpower would not gain momentum. As a matter of fact, the

manpower are skilled workers.

majority of national manpower are skilled workers, which explains the fact that

Also, the private sector offers

most unemployed persons are university graduates. The second reason is that

limited job opportunities and a few

the private sector offers limited job opportunities and a few work fields for

work fields for females.

females. In 2014, males made up some 88% of new entrants to the labor market
in the private sector, while females accounted for a mere 12%. Also in the same
year, unemployment among females rose by of 32.8%, compared to 5.9% among
males.

Exports to GDP ratio stood at

Saudi exports reached a total value of some 1,32 trillion Saudi Riyals in 2014,

47.5%, while imports to GDP ratio

accounting for 47.5% of GDP. The value of imports stood at SR. 957,6 billion, to

was to the tune of 34%. The current

the tune of 34% of GDP. In 2014, the current account posted a decline due to

account posted a sharp decline in

plummeting oil export revenues. In this respect, the current account surplus

2014.

declined to 10.3% of GDP in 2014, compared to 18.2% in 2013. The drop in the
current account surplus is expected to grow even further in the future as a result
of falling oil prices. On the other hand, the volume of the Kingdoms
merchandise trade fell to SR. 1.9 trillion in 2014, compared to SR. 2.1 trillion in
2013. As a measure of open economy level, foreign merchandise trade accounted

In 2014, remittances by expatriate


labor in the kingdom grew at much

for some 69% of the Kingdoms GDP in 2014, compared to 73% in 2013.

result of restrictions on issuance of

In 2014, remittances by expatriate labor in the kingdom grew at a much slower


pace than a year earlier. In this regard, remittances rose in 2013 by 19%,

visas, as part of the overall reform

amounting to a total of SR. 127,768 million, compared to a rise of 6% and a total

of the labor market.

amount of SR. 135,428 million in 2014. One key factor behind the lower growth

slower pace than a year earlier, as a

of transfers has been the restrictions on issuance of visas, as part of the overall
reform of the Kingdoms labor market.

SAUDI ECONOMIC REPORT 2014 , (SECOR)

Introduction (Continued)
The world oil market experienced tremendous changes in 2014, prompted by
decline of world economic growth and a lower growth of oil demand, coupled
with an oversupply of oil. According to OPEC data for 2014, worldwide oil
demand grew by 1.06% to 91.2 million barrels per day (MBD), while world
Declining growth of world

supply grew by 2.39%, amounting to 92.22 MBD. With the global oil balance

economy and a slowdown

posting a surplus of1.02 MBD, oil prices plummeted in 2014. The price of Brent

of growth of oil demand,


coupled with an oversupply
of oil, caused oil prices to
plummet in 2014.

crude fell by 8.78% to $ 99.08 per barrel compared to $ 108.62 a barrel in 2013.
The average price of Arabian light crude dropped to $ 97.18 a barrel in 2014,
accounting for a decline of 8.78% from its 2013 level of $ 106.53. Support for oil
demand came from non-OECD countries, particularly China, Middle East
countries, Latin American countries and African states. However, growth of oil
supply came from non-OPEC countries, particularly USA, as US shale oil
accounted for most increase in supply.
Preliminary actual data of the Kingdoms 2014 budget were remarkably
different from initial budget estimate which expected a balanced budget, at
SR.855 billion, in which revenues and expenditure are balanced out. For the

The kingdoms 2014 budget

first time however since 2009, the kingdoms 2014 budget showed a deficit of

showed a deficit of SR. 54

SR. 54 billion ($ 14.4 billion). This deficit is equal to 1.9% of GDP. Although

billion. However, government

actual revenues exceeded the budgeted revenues by 22.3%, actual expenditure

expenditure

has

been

maintained in the countrys


2015 budget estimate, despite
growing signs of declining oil
prices.

surpassed budget revenue estimates by a much higher rate of 28.7%. With the
expenditure accounting for 39% of GDP, this led to a budget deficit. However,
government expenditure continued to rise in the countrys 2015 budget
estimate, despite oil market vagaries that led to a decline of oil prices. This is a
testimony to the continued course by the kingdom to strengthen and bolster
development projects that are bound to enhance on-going development.

SAUDI ECONOMIC REPORT 2014 , (SECOR)

Introduction (Continued)
In WEF 2014/2015, The Global competitiveness report showed that the
kingdoms raking has retreated by four ranks, to reach now to the 24th , down
Saudi

Arabia's

Global

Competitiveness Report ranking has


retreated. The kingdom, however,

from the 20th position, among the 144 countries covered by the report.
Macroeconomic environment quality pillar remained stable, with the kingdom
holding the 4th rank internationally, due the positive results achieved in some

maintained its rank in terms of the

of the pillars indicators. In this regard, the Kingdom held the 2nd position

Macroeconomic

Environment

globally in public debt-to-GDP-ratio, and came 6th in terms of government

In addition, the

budget balance as a share of GDP. However, the Kingdom faces challenges in

Kingdom held the 2nd rank globally

order to improve the countrys listings with respect to other indicators. Among

in public debt-to-GDP-ratio .

these are participation of women in the workforce, where the kingdom held

Quality pillar.

141st position, and imports as a percentage of GDP, where the kingdom held
120th position.
World economy experienced a slight downturn in 2014, as it grew by 3.39%,
compared to 3.41% a year before. The slowdown was the result of weak growth
in some oil exporting countries, such as Venezuela, due to the sharp drop in
World economy witnessed a slight

world oil prices. Growth also declined in some developed countries, such as

downturn in 2014, coupled with a

Japan. Worldwide, inflation rate dropped in 2014 to 3.5%, compared to 3.9% a

decline of inflation rate and a fall in

year earlier. Unemployment rates receded in some major world economies,

unemployment.

where in the advanced economy they decreased from 7.9 % in 2013 to 7.3% in
2014.In the Eurozone, unemployment dropped to 11.6 % in 2014, lower than its
earlier level of 11.9% in 2013. world trade volume slackened in 2014, posting a
slight growth of 3.4%, compared to 3.5% a year before. However, global trade
volume is expected to grow by 3.7% in 2015 according to IMF forecasts.

SAUDI ECONOMIC REPORT 2014 , (SECOR)

11

1
PERFORMANCE OF THE
SAUDI ECONOMY

SAUDI ECONOMIC REPORT 2014 , (SECOR)

11

1. Performance of the Saudi Economy


The real GDP of Saudi economy grew
by 3.47% in 2014 compared to 2.67%
in 2013.

The real GDP of Saudi economy grew markedly during 2014 by 3.47% compared
to 2.67% in 2013. This increase is attributed, mainly, to the increase of average
oil production by 0.8% (from 9.59 million barrel per day (mbpd) in 2013 to 9.68
mbpd in 2014). This means the Kingdom's oil production increased by 27.5
million barrels in 2014 compared to 2013 thereby reaching about 3.55 billion
barrels. Such an increase may also be attributed to the rapid growth of oil

Oil refining sector is the fastest


growing sector in the Saudi economy.

refining activity which increased by 12.53% in 2014 compared to -4.69% in


2013. It is noteworthy that this activity has benefited from entry of large
refineries into production phase such as Saudi Aramco Total Refining and
Petrochemical Company (SATORP) in Jubail Industrial City and Yanbu Aramco
Sinopec Refining Company (YASREF) in Yanbu, which contributed to increase
of the refining production capacity in the Saudi economy.
Comparing the oil sector with the non-oil sector, we find that increase of oil

The slower growth in the private


sector reflects the continuation of the
economy`s

dependence

on

government spending and its growth


is connected to it.

production in 2014 has contributed to increase of the growth rate of oil sector
by 1.49% compared to -1.63% in the previous year. With respect to non-oil
sector, it grew by 5% in 2014 compared to 6.38% in the previous year. This
decline is attributed to decline of the growth rates of the government and
private sectors, at constant prices, from 6.95% in 2013 to 5.58% in 2014 for the
private sector, and from 5.09% in 2013 to 3.68% in 2014 for the government
sector. Contribution of private non-oil GDP to total GDP in 2014 amounted to
39.5% compared to 38.7% in the previous year. On the other hand, the
contribution of oil GDP to total GDP amounted to 42.7% in 2014 compared to

The participation of the private sector


in GDP was 2.16% in 2014 compared
to 2.6% in 2013.

43.5% in the previous year (table 1).


The slowdown of growth in the private sector reflects its continuous
dependence on government spending and linkage of its growth with such
spending. The rate of growth of government capital expenditure decreased
from 19% in 2013 to 12% in 2014. However, despite slowdown of growth in the
private sector, yet it is still the most-contributing sector to GDP in 2014 with a
share of 2.16% to GDP growth compared to 0.64% for oil sector and 0.63% for
the government sector.

SAUDI ECONOMIC REPORT 2014 , (SECOR)

12

FIRST: Impacts of Changing the Base Year Used For


Estimation of GDP from 1999 to 2010:
The Central Department of Statistics and Information (CDSI) has changed the
CDSI announced the change of

base year used for estimation of the real GDP from 1999 to 2010. This, in turn,

the base year used for estimating

led to change in the shares of various economic activities which compose total

GDP from 1999 to 2010.

GDP. Changing the base year from 1999 to 2010 is quite suitable since the base
year should represent a more typical year. The year 1999 witnessed the lowest
prices of oil during the 1990s while the year 2010 is considered as more typical.
The national information centers, in charge of data, usually undertake such a
task to give a clear, accurate and more realistic image about growth of real GDP.
Changing the shares of different sectors lead to a clearer understanding of the
change in structure of the Saudi economy and the growth-driving sectors.

The change in the base year

These changes in classification of the sectorial shares made the oil sector enjoy

resulted in increase of the oil

the largest share of total GDP while the shares of most other sectors declined.

sector share, whereas the non-oil


sector share decreased.

Change of the base year led to increase of the oil sector contribution, to real
GDP of 2013, substantially from 20.4% according to the old base year to 43.5%
as per the new base year. On the other hand, contribution of the non-oil private
sector declined markedly from 58.9% according to the old base year to 38.7%
as per the new base year. However, contribution of the government sector
remained at almost similar levels according to the two classifications, 19.8%
and 17% respectively.

Table )1( : GDP Growth Rate by Institutional Sectors at 2010 Constant Prices
)Million Riyals(

2013

Sectors

Amount

2014

Growth

Share

rate (%)

(%)

Amount

Growth

Share

rate (%)

(%)

Oil Sector

1,022,382

-1.63

43.50%

1,037,615

1.49

42.7%

Non-oil sector

1,308,810

6.38

55.69%

1,374,277

5.00

56.5%

908,846

6.95

38.67%

959,585

5.58

39.5%

399,964

5.09

17.02%

414,692

3.68

17.1%

19,181

-1.84

0.82%

19,986

4.20

0.8%

2,350,373

2.67

100.00%

2,431,877

3.47

100.0%

Non-oil private sector


Non-oil government sector

Import duties
Gross Domestic Product

Source: Department of Statistics and Information, National accounts indicators 2014.

SAUDI ECONOMIC REPORT 2014 , (SECOR)

13

Moreover, change of the base year caused a remarkable increase in the share of
Non-oil

activities

share

retreated by varying degrees


and the greatest impact was in
the financial services activity.

mining and quarrying activity while shares of other non-oil activities declined.
Contribution of mining and quarrying activity to GDP amounted to 41% for the
base year 2010 compared to 18.8% for the base year 1999. The shares of all
other activities changed at varying degrees with the maximum changes in the

The mining quarrying activity


includes producing crude oil

activities of financial services, transport and communications, wholesale and

and gas and the mineral

the least changes took place in banking services activity and government

resources.

services activity which were not substantially affected by the change of the

The drop in oil prices in 1999


resulted in the decline of oil
sector share and the rise of
private sector share according to
the old classification

retail trade, construction, and manufacturing respectively. On the other hand

base year (figure 1). The reasons behind change of shares of activities upon
change of the base year can be attributed to the fact that oil prices in 1999 were
very low at an average of USD 17 per barrel, by which the oil sector share
decreased, and of the private sector share of the GDP increased. With the
change of base year to 2010, oil sector share improved due to high prices of oil
(USD 77 per barrel in that year) while the non-oil private sector share declined.

Figure )1( : Effect of Changing the Base Year on the % Shares of Institutional Sectors & Economic Activities

Source: Prepared by SECOR based on CDSI data, the national accounts indicators in 2014.
SAUDI ECONOMIC REPORT 2014 , (SECOR)

14

Changing the base year caused


adverse impacts
on GDP
growth rate.

Change of the base year also affected the growth rate of the GDP. High oil
prices in 2010 increased the weight of oil sector substantially, albeit oil
production remained unchanged to a great extent. Hence, the high weight of

Average annual growth rate of

the (stable) oil sector implies lower growth of the GDP .

GDP was estimated by 6.2%

Comparing the GDP at constant prices, we find that the GDP grew at lower

during the period (2005-2012)

levels in the base year 2010 compared to growth levels in the base year 1999.

for the base year 1999, while it

SECOR estimates indicate to an average annual growth rate of 6.2% for the GDP

didnt exceed 4.1% for the base


year 2010.

during the period 2005-2012 using the base year 1999 and not more than 4.1%
using the base year 2010 (figure 2).

Figure )2( : Effects of Changing the Base Year on Real GDP and its Rate of Growth

Source: Prepared by SECOR based on CDSI data, the national accounts indicators in 2014.
SAUDI ECONOMIC REPORT 2014 , (SECOR)

15

SECOND: Growth Rates and Contribution of the Private


and Oil Sectors to Growth of the GDP
Based on the aforesaid change of the base year and as a result of giving the oil
Despite decline of non-oil

sector the largest share of GDP, the large fluctuations which may take place in

private sector share, it yet still

oil production will be apparently reflected on growth of the GDP.

constituted the largest sector


contribution share in the Saudi
economy growth in 2014.

Furthermore, notwithstanding decline of the share of non-oil private sector, yet


it is still the most-contributing sector to growth of the Saudi economy in 2014.
The growth track of overall GDP, oil sector GDP and private sector GDP, over
the period 2001-2014, show that the GDP growth trend, which depends on the
percentage share of GDP, follows the growth track of oil sector. Increase or
decrease of the growth rate of oil sector necessarily leads to increase or
decrease of the growth rate of the GDP (figure 3/A). However, the largest

The private sector contribution


to in the GDP growth declined,
while the oil sector contribution
increased during 2013 and
2014, however the private

contribution to GDP growth (contribution to increase) during most years


except for the encircled years has been through the private sector
contribution to growth by a higher rate than that of the oil sector increase rate
(figure 3/B(.

sector contribution is still the

The percentage contribution of the private sector to GDP in 2014 decreased

largest.

compared to that of 2013, namely 2.16% compared to 2.60% in 2013. On the


other hand, contribution of the oil sector to GDP in 2014 increased compared
to that of 2013. This share amounted to 0.64% in 2014 compared with -0.75%
in 2013.
Contribution of oil sector to GDP growth were the largest in 2011 and 2012 with

The oil sector contribution to

shares of 5.5% and 2.3% respectively compared to private sector contribution

the GDP growth constituted the

of 3% and 2.1% respectively. The high share of oil sector contribution to GDP

largest share during the years

during these years is attributed to the increase of oil production in 2011 and

2011 and 2012.

2012 by 14% and 5.15% respectively.

SAUDI ECONOMIC REPORT 2014 , (SECOR)

16

According to Figure (3/B), the oil sector contribution to GDP in 2003 was very
In 2003, the oil sector

high 9.7% compared to contribution of the private sector which stood at 1%. In

contribution was the largest in

that year, the Kingdom's oil production increased from 2588.98 million barrel

GDP as it reached to 9.7% while

to 3069.74 million barrel, or almost 19% up. With the exception of these years

the private sector contribution


was 1% .

in which oil production increased substantially, the private sector always


contributed with the largest share to GDP growth.

Figure )3( : Rates of Growth and Contribution of the Private and Oil Sectors to Growth of the GDP

Source: Prepared by SECOR based on CDSI data.


SAUDI ECONOMIC REPORT 2014 , (SECOR)

17

THIRD: Growth Rates of Activities of the Economy


Distribution of GDP by economic activities indicate to disparities in the growth
rates of the activities of the economy in 2014 (table 2). Mining and quarrying
Growth rates varied in the
economy activities in 2014 .

activity accounts for 39.9% of the real GDP and it represents the largest activity
of the economy and achieved a growth rate of 0.77% in 2014 compared to a
negative rate in 2013. This is mainly attributed to increase of oil production by
0.8% due to national and international factors including steady increase of
domestic consumption of oil. The Kingdom is the largest consumer of crude oil
in the Middle East. It consumes about a quarter of its total production of crude
oil and natural gas, or almost 2.9 million barrel of oil per day.

Table )2( : Gross Domestic Product Growth Rate by Economic Activity at 2010 Constant Prices
)Million Riyals(

The contribution of
2013

2014

economic activities

Economic Activites
Amount

Annual

Share
(%)

2.1%

in the GDP growth

Annual

Share
(%)

50,502

growth (%)
1.77

Amount

2013

2014

2.1%

0.0%

0.0%

1. Agriculture,Forestry &Fish

49,623

growth (%)
1.91

2. mining & quarrying

963,602

-1.42

41.0%

970,995

0.77

39.9%

-0.6%

0.3%

954,551

-1.46

40.6%

961,677

0.75

39.5%

-0.6%

0.3%

9,051

3.16

0.4%

9,318

2.95

0.4%

0.0%

0.0%

255,603

3.37

10.9%

275,615

7.83

11.3%

0.4%

0.9%

A) Petroleum Refining

62,029

-4.69

2.6%

69,801

12.53

2.9%

-0.1%

0.3%

B) Other

193,574

6.25

8.2%

205,813

6.32

8.5%

0.5%

0.5%

4. electricity, gas & water

29,837

1.63

1.3%

31,557

5.77

1.3%

0.0%

0.1%

5. construction

112,617

7.77

4.8%

120,211

6.74

4.9%

0.4%

0.3%

6. Wholesale & retail trade, restaurants & hotels

212,698

6.55

9.0%

225,420

5.98

9.3%

0.6%

0.5%

7. Transport, storage & communications

128,620

6.42

5.5%

136,602

6.21

5.6%

0.3%

0.3%

8. Finance, insurance, real estate & business services

218,365

9.22

9.3%

227,350

4.11

9.3%

0.8%

0.4%

A) Ownership of Dwellings

115,307

13.99

4.9%

121,040

4.97

5.0%

0.6%

0.2%

B) Others

103,058

4.34

4.4%

106,310

3.16

4.4%

0.2%

0.1%

9. community, social & personal services

45,340

6.46

1.9%

47,908

5.66

2.0%

0.1%

0.1%

10. Imputed bank services charge

20,168

1.03

0.9%

20,366

0.98

0.8%

0.0%

0.0%

1,996,136

2.35

84.9%

2,065,793

3.49

84.9%

335,057

4.92

14.3%

346,099

3.30

14.2%

0.7%

0.5%

Total

2,331,192

2.71

99.2%

2,411,892

3.46

99.2%

Import charges

19,181

-1.84

0.8%

19,986

4.20

0.8%

Gross domestic product

2,350,373

2.67

100.0%

2,431,877

3.47

100.0%

2.67

3.47

A) crude oil & natural gas


B) Other
3. manufacturing

Sub-total
11. Producers of government services

Source: Central Department of Statistics and Information, National accounts indicators 2014. SECOR accounts.

SAUDI ECONOMIC REPORT 2014 , (SECOR)

18

Increase of domestic demand for oil is attributed to the rapid growth of


manufacturing activity as well as fuel subsidies and population growth. At the
global level, Saudi oil production also increased due to fluctuations of Libyan
oil supplies and attempts by the Kingdom to maintain the share of exports in
The manufacturing industry
growth jumped from 3.37% in
2013 to 7.83% in 2014.

the world market. The mining and quarrying activity contributed to 0.3% of
GDP growth in 2014.
Manufacturing activity achieved a high rate of growth which rose from 3.37%
in 2013 to 7.83% in 2014 due to the substantial growth of oil refining activity
which achieved the highest and fastest growth rate, 12.53% in 2014 compared
to -4.69% in the previous year. Hence, oil refining is considered the fastest
growing activity in the Saudi economy in 2014 due to entry of large refineries
into the stage of production and increase of domestic production capacity of

Manufacturing industry has


characteristics of the leading
production sector of the Saudi
economy.

refining. New refineries included SATORP in Jubail. This is a joint venture


between Saudi Aramco and the French Total Company with a production
capacity of 400 thousand barrels per day. They also included YASREF in Yanbu,
which is owned by Saudi Aramco and Chinese Sinopec Company, with
production capacity of more than 400 thousand barrels per day of Arabian
heavy crude. There are also many future projects for expansion in the field of
refining and increase of the production capacity of refined products and
petrochemicals such as Sadara Petrochemicals Complex with a total cost of
USD 20 billion and comprises 26 manufacturing units. The production capacity
of this Complex is 3 million tons per year of various types of petrochemicals
(Shaded Text No. 1).
Despite decrease of percent share of oil refining within the activities of the
economy, yet its contribution to GDP increased from -0.1% in 2013 to 0.3% in
2014. The manufacturing activity is the most contributing to GDP growth, with
a contribution of 0.9% (figure 4). It is noteworthy that manufacturing activity
accounts for 11.3% of the real GDP and is expected to continue as the main
driver of growth of the Saudi economy. This production sector is considered a
key sector of the Saudi economy. Using the Social Account Matrix (SAM), the
forward and backward linkages of this activity are estimated to be about 1.15
backward linkages with other activities. This means that this activity depends
in its production on inputs from other activities of the economy.

SAUDI ECONOMIC REPORT 2014 , (SECOR)

19

Moreover, its forward linkages are estimated to be about 1.36 linkages. Thus,
The backward and forward
linkages of the Manufacturing
industry are estimated by 1.15
and 1.36 respectively.

expansion of this activity may stimulate production by other activities. It is


noteworthy that any activity with backward and forward linkages greater than
one is considered a key sector.
Electricity, gas and water activity achieved a very high growth rate compared
to the previous year, 5.77% in 2014 compared to 1.63% in 2013 due to rapid
growth of demand for electricity and water. For instance, the peak electricity

Electricity, gas and water

loads in the Kingdom reached 56,500 MW in the summer of 2014, according to

activity grew by 5.77% in 2014

Power System Control Center, or 7.7% up compared to that of 2013. Total

as a result of the increasing


growth in the demand for
electricity and water.

electricity consumed increased from 256,688 million Kwh in 2013 to 266,293


million Kwh in 2014 according to the MOWE data.
The construction activity maintained its position as one of the most-growing
activities of the economy with a growth rate of 6.47% in 2014. This is mainly

Despite the recession in the rate


of growth of construction
activity, yet it is still among the

attributed to ongoing government investment spending on the large


infrastructure projects. Despite increase of the GDP value of this activity, yet
the growth rate started to decline compared to that of 2013 which stood at

highest growing activities in the

7.77%. This may be due to the fact that most of the projects have been

economy.

completed or their allocations spent during the past year. Contribution of the
construction sector to GDP decreased from 0.4% in 2013 to 0.3% in 2014.
Figure )4( : Contribution of Economic Activities to Growth of GDP

Source: preparation and accounts by SECOR.


Note: Figure crosses for (the contribution of economic activities in growth) and not in the gross domestic product
SAUDI ECONOMIC REPORT 2014 , (SECOR)

21

As the case with the construction activity, the growth rate of wholesale and retail
trade, restaurants and hotels activity declined slightly from 6.55% in 2013 to
5.98% in 2014. Most probably, reforms of the labor market and replacement of
The reforms of the labor market

high-cost Saudi labor in place of expatriate labor may have caused decline of

caused decline of growth level

growth level in this sector. According to MOL data, the average salary of the Saudi

in the wholesale and retail

worker in the wholesale and retail trade activity is about SR 3619 compared to SR

trade, restaurants and hotels

1204 for the non-Saudi, i.e. the cost of the Saudi worker is equivalent to three

activity.

non-Saudi workers. Contribution of this activity to GDP also decreased from 0.6%
in 2013 to 0.5% in 2014.
Transport and communications activity grew by a high rate of 6.21% in 2014.
However, this rate is slightly lower than the rate realized in 2013, namely 6.42%.

Transport and communications


activity grew by a high rate of
6.21% in 2014 compared to
6.42% in 2013.

This activity is likely to benefit from completion of most of the development


projects of roads and communications currently under way. Improvement of
commuting and mobility in the Saudi economy is positively reflected on
performance of this activity in general. The communications activity has
benefited from growth of internet and broadband services. According to a
specialized study about the Gulf market, investments in communication

Internet

penetration

also

witnessed high rates whereas


internet users reached about
18.3 million users in 2014.

activities amounted to SR 132 billion in 2014. Internet penetration also witnessed


high rates whereas internet users reached about 18.3 million users in 2014.
According to Communications and Information Technology Commission data,
spending on communications and information technology services increased to
SR 102 billion by the end of 2014 compared with SR 36 billion in 2005, or at an
average annual growth rate of 14%. Spending on information technology
represents about 36% of total spending, and is concentrated mainly on hardware
and technology services. Spending on communications and information

Growth

rate

of

finance,

insurance, real estate and


business

services

activity

declined markedly from 9.22%


in 2013 to 4.11% in 2014

technology in the Kingdom is expected to increase by 12% in 2015 due to


substantial private and government investments.
Growth rate of finance, insurance, real estate and business services activity
declined markedly from 9.22% in 2013 to 4.11% in 2014. Growth of financial
services activity is usually determined by the level of private sector activity.
Slowdown of growth in this sector may lead to low rates of growth in the activity
of financial services. Contribution of this activity to GDP growth also declined
from 0.8% in 2013 to 0.4% in 2014.

SAUDI ECONOMIC REPORT 2014 , (SECOR)

21

FOURTH: Per Capita GDP


Per capita GDP in the Kingdom

Per capita GDP in the Kingdom decreased by 2.27% in 2014 with a value of

decreased by SR 2114 in 2014

SR 90,946 (or USD 24,252) at current prices or SR 2,114 less from its value in the

compared to the previous year.

previous year which amounted to SR 93,060 (or USD 24,816).


By the end of 2014, per capita GDP amounted to SR 7,579 per month compared
to SR 7,755 by the end of the previous year. Decline of per capita income in 2014

Per capita GDP amounted to

is attributed to growth of the value of GDP at a rate lower than the rate of

7579 SR monthly by the end of

population growth. GDP grew by about 0.26% from SR 2791,3 billion in 2013 to

2014.

SR 2798,4 billion in 2014. On the other hand, population grew by 2.6% from 30
million persons in 2013 to about 30,8 million in 2014 (table 3).

Table )3( : Per Capita GDP


Annual

Annual

change %

change %

Amount

2013

2014

2,798,432

1.39%

0.26%

29,195,895 29,994,272 30,770,375

2.66%

2.59%

-1.30%

-2.27%

2012

2013

2014

Amount

Amount

GDP at current prices (million Riyals)

2,752,334

2,791,259

Total population (People)

Items

Average Per capita GDP at current prices

94,271

93,060

90,946

Source: Central Department of Statistics and Information, National accounts indicators 2014. Population Projections 2013.

SAUDI ECONOMIC REPORT 2014 , (SECOR)

22

FIFTH: Spending on GDP


Spending on GDP, at current prices of purchasers prices, increased by 0.26%
from 2791,3 billion in 2013 to SR 2798,4 billion in 2014. This low rate of
spending on GDP is attributed to decrease in the value of exports of goods and
services by 8.54% from SR 1453,7 billion in 2013 to SR 1329,5 billion in 2014.
Decline in value of exports is mainly attributed to decline of oil exports,
including refined products and natural gas, by 11.64% in 2014 compared to the
previous year, while non-oil exports increased by 6.63% and services exports by
1.28% during the same period. Contribution of exports to spending on GDP
amounted to 47.5% in 2014 compared to 52.1% in 2013. On the other hand, the
rate of growth of imports increased to 11.8% in 2014 compared to 6.83% in
2013. The value of merchandise imports increased by 3.38% in 2014 while the
services imports increased by a high rate of 32.07% in the same year.
Consumption expenditure of the government sector grew by 17.60% in 2014
compared to 14.03% in 2013. Final consumption of the private sector also
increased by 8.48% in 2014 compared to 6.79% in 2013. Moreover, spending on
gross capital formation (gross fixed capital formation plus change of inventory)
amounted to SR 777 million in 2014 or 6.16% up from that of the previous year,
(table 4).

The low rate in spending on


GDP is attributed to decrease in
the value of exports of goods
and services by 8.54%.

Table )4( : Expenditure on Gross Domestic Product at Current Prices


2013

Items

Amount

2014

Annual

Share

growth (%)

(%)

Amount

Annual

Share

growth (%)

(%)

Govt. Final Consumption Expenditure

628,522

14.03

22.5%

739,156

17.60

26.4%

Private Final Consumption Expenditure

838,735

6.79

30.0%

909,857

8.48

32.5%

Change of Inventory

70,010

36.4%

2.5%

97,494

39.3%

3.5%

Fixed Capital Formation

662,455

7.73

23.7%

680,080

2.66

24.3%

Exports of Goods and Services

1,453,665

-2.95

52.1%

1,329,530

-8.54

47.5%

Imports of Goods and Services

862,128

6.83

30.9%

957,686

11.08

34.2%

Expenditure on GDP

2,791,259

1.41

100.0%

2,798,432

0.26

100.0%

Source: Central Department of Statistics and Information, National accounts indicators 2014.

SAUDI ECONOMIC REPORT 2014 , (SECOR)

23

Shaded Text No. 1: The Kingdom`s Refineries


Investment in the refining sector is of utmost importance to the Kingdom in its endeavors to realize a diversified
economic growth and to create job opportunities for the new entrants into labor market. Investment in this sector
has started since 1980s. However, the old refineries, such as Jeddah refinery, are less developed than those
established later. Due to growing domestic demand for light products, substantial investments have been
channeled for modernization of the oil-refining sector. The production capacity increased after operation of
SATORP and YASREF refineries in 2014.
Domestic consumption of refined products in the Kingdom has multiplied as a result of government support of
fuel for transport and electricity generation as well as the steady increase of population and economic growth, a
matter which led to increase of electricity consumption and more use of fuel in the field of industry. Fuel price in
the Kingdom is the least worldwide. Diesel price is 6.7 cents per litre and gasoline price is 16 cents per litre.
Refined products are also sold at low prices for the Saudi Electricity Company which consumes about 200,000
barrels of diesel and 40,000 barrels of fuel oil per day for electricity generation.
Refinery
Jeddah
Ras Tanura
Riyadh
Yanbu
Jazan
Yanbu (Samref(
Jubail (Sasref(
Rabigh
Luberef
Jubail (Satorp)
Yanbu (Yasref)
Fujian Refining and
Petrochemical Co
Showa Shell, Japan
S-Oil, Republic of Korea
Motiva Enterprises LLC,
United States

Operational

Shareholder Name
Domestic refineries
1976
Saudi Aramco
1986
Saudi Aramco
1981
Saudi Aramco
1979
Saudi Aramco
2116
Saudi Aramco
Domestic refining ventures
1983
Saudi Aramco; Exxon
1986
Saudi Aramco; Shell
1991
Saudi Aramco; Sumitomo
Chemical
Saudi Aramco
2114
Saudi Aramco; Total
2114
Saudi Aramco; Sinopec
International refining ventures
25%Saudi Aramco Fujian Co
_
_
_
_

SAUDI ECONOMIC REPORT 2014 , (SECOR)

15%Saudi Aramco Showa shell


Co
35% Saudi Aramco S-Oil Co
51%Saudi Aramco Sell Co

24

Capacity (b/d)
90,000
550,000
124,000
241,111
400,000
411,111
315,111
425,111

400,000
400,000
241,111
395,111
669,000
1070,000

2
PRICES AND COST OF LIVING

SAUDI ECONOMIC REPORT 2014 , (SECOR)

25

2. Prices and Cost of Living


The inflationary pressures in the Kingdom decelerated recording an inflation
The inflationary pressures in the
Kingdom decelerated recording
an inflation rate of 2.7% in 2014
compared with 3.5% in 2013.

rate of 2.7% in 2014 compared with 3.5% in 2013. It is noteworthy that external
and internal factors have contributed in the slowdown of inflation in the
Kingdom. At the global level, the value of the dollar increased, meaning that
the value of Saudi Riyal went up against most currencies in the world during
2014 in addition to the decrease of world food prices and the weak growth of
the world economy. At the domestic level, the overall inflation rate declined
due to the stability of inflation rate of rents (which is the main branch
component of housing), slowdown of inflation rate of food and drinks, decrease
of the inflation rate in transport and communications sectors and the moderate
growth rate of non-oil economy.

The main factors influencing the


overall inflation rate in the Saudi
economy are the food section
and housing, water, electricity,
gas and other types of fuel as

FIRST: Cost of Living Index


The main factors influencing the overall inflation rate in the Kingdom
comprise the following main spending sections: food section which

they comprise 43% the overall

represents 22% of the overall index; housing, water, electricity, gas

index.

and other types of fuel section which constitutes 20.5%; transport and
communications section which constitutes 18.5% of the overall index;
house equipment and maintenance works which constitutes 9.1% and
clothing and footwear section which represents 8.4%. The other six

The inflation rate of rents

sections constitute 21.5% of the overall index.

remained stable at 3.9% , which

Concentrating on the first three sections which represent 61% of the

influenced the stability of

overall index, the inflation rate of rents remained stable at 3.9% in

inflation rate of housing section,

2014, a matter which affected the stability of the inflation rate of the

which is irresponsible for the

housing section. Therefore, this section could not be considered as

low inflation rate in 2014.

responsible for the drop of the inflation rate.

SAUDI ECONOMIC REPORT 2014 , (SECOR)

26

The two sections responsible for the decline of the inflation rate are the food
and drinks section where the inflation rate decelerated from 5.7% in 2013 to
3.3% and the transport and communication section where the inflation rate
declined from 2.2% in 2013 to a negative growth rate of 0.34%.
Moreover, the inflation rate decelerated in the clothing and footwaer section
The recreation and culture section
recorded the highest inflation rate

from 1.5% to 0.7%, but the impact of this section on the general index in 2014
did not exceed 2.2%.

increasing from 1.7% in 2013 to

Despite the increase of the prices of the group of hotels and furnished

7.2% in 2014.

apartments services from 129 to 134 and an inflation rate from 0.2% in 2013 to
3.7 in 2014, the inflation rate in the hotels and restaurants sector decelerated
from 4.2% to 2.2% while the recreation and culture section recorded the
highest inflation rate increasing from 1.7% in 2013 to 7.2% in 2014. This section
represents a share of about 3.5% of the overall index.

The housing, water, electricity and


fuel section ranked first in terms of
contribution to overall inflation in
2014, followed by food and drinks
section.

The recreation and culture section comprises: audio-visual devices,


photography, recreational and cultural goods and services, books, newspapers,
stationery and offers of holidays and tourism. The section has been influenced
by the increase in its all groups, particularly in the offers of holidays and
tourism which increased by 11.2% and the group of other goods related with
recreation and tourism which increased by 18.4%, (table 5).
The overall inflation rates are influenced by the changes in sections comprising
the overall cost of living index by different ratios. The housing, water,
electricity and fuel section ranked first in terms of contribution to overall
inflation for 2014, where it achieved 0.9%, which is the same rate of 2013. The
contribution rate of food and drinks to the overall inflation rate declined from
1.3% in 2013 to 0.8% in 2014. The contribution rate of house equipment and
maintenance works in 2014 remained at the same level of the previous year
(about 0.4%). The contribution rate of transport and communication sections
in the overall inflation rate declined from 0.2% and 0.1% in 2014 to 0.0% for
each.

SAUDI ECONOMIC REPORT 2014 , (SECOR)

27

The recreation and culture


section ranked fourth in 2014 in
terms of influence ratio on
o v e r a l l i n f l a t i o n i n d e x.

The recreation and culture section ranked fourth in 2014 in terms of influence
ratio on overall inflation index whereas the rate of contribution to inflation
increased from 0.1% in 2013 to 0.2% in 2014.

Table )5( : Cost of Living Indices by Main Spending Sections


(2007=100)

Relative
Items

importance
(%)

Inflation
Inflation rate

2012

2013

2014

Amount

Amount

Amount

2013

2014

Contribution rate
(%)
2013

2014

General Index

100

122.4

126.7

130.1

3.5%

2.7%

Food and beverages

21.7

132.9

140.5

145.1

5.7%

3.3%

1.3

0.8

Tobacco

0.5

141.3

153.1

162.3

8.4%

6.0%

0.0

0.0

Clothing and Footwear

8.4

103.3

104.8

105.5

1.5%

0.7%

0.1

0.0

Housing , Water, Electricity, Gas & other fuels

20.5

148.7

153.8

159.1

3.4%

3.4%

0.9

0.9

Furnishings, household equipment & maintenance

9.1

117.5

122.6

128.2

4.3%

4.6%

0.4

0.4

Health

2.6

105.6

109

112.6

3.2%

3.3%

0.1

0.1

Transport

10.4

108.3

111

110.4

2.5%

-0.5%

0.2

0.0

Communication

8.1

92.1

93.8

93.7

1.8%

-0.1%

0.1

0.0

Recreation and Culture

3.5

104.5

106.3

114

1.7%

7.2%

0.1

0.2

Education

2.7

110.2

112.6

115.9

2.2%

2.9%

0.1

0.1

Restaurants and Hotels

5.7

121.7

126.8

129.6

4.2%

2.2%

0.2

0.1

Miscellaneous goods and services

6.8

117.8

117.6

120.1

-0.2%

2.1%

0.0

0.1

Source: SECOR calculation based on the Central Department of Statistics and Information data, Cost of living Bulletin 2014.

SAUDI ECONOMIC REPORT 2014 , (SECOR)

28

SECOND : Wholesale Price Index


The growth in Wholesale Price
Index declined form 1.2% in 2013
to 0.6% in 2014.

This index measures the average change in the prices of goods and services sold
in the domestic wholesale market. This index comprises a sample of 160 items
distributed over ten main sections. Growth in this index decelerated and
recorded an increase of 0.6% in 2014 compared with the change ratio of 1.2%
in 2013. This is attributed to the slowdown of increase in some main groups of
this index. Prices of foodstuff and live animals section increased by 0.8%
compared with an increase ratio of 3.8% in the previous year. This section

Foodstuff prices recorded a rate of

represents 31.9% of the average wholesale price index. The prices of goat meat,

0.8% in 2014, compared to 3.8%


in 2013.

percentage share of these items are very low in the average price index

fresh fish and rice increased by 8.7%, 11%, and 4.9% respectively but the
representing 0.79%, 0.89% and 0.49% respectively.

Chemical materials prices rose by


3.9%, especially the prices of
ethylene

and

dichloride,

and

Prices of live cows, poultry, egg, vegetables and fruits decreased, particularly
prices of tomato which declined by 10.3%. On the other hand, prices of orange,

polyethylene

dates, coffee and fodder have decreased. Prices of oils, animal and plant fats

Pauline

also declined by 1.2% while prices of chemical materials section and related
materials decreased by 3.9%. The share of this section represents 9.8% of the

polyethylene.

overall index. The highest increase ratio was in the prices of the chemical
materials section, ethylene, ethylene dichloride and polyethylene. The highest
decline ratio was in other goods section, particularly gold, by 8.4%.
Table )6( : Annual Average of Wholesale Price Index
Relative

items

importance

2012

2013

2014

Annual

Annual

change(%)

change (%)

(2012-2013)
1.2%

(2013-2014)
0.6%

General Index

100

Amount
156.4

Amount
158.2

Amount
159.1

Food & Live Animals

31.9

178.6

185.3

186.7

3.8%

0.8%

Beverages & Tobacco

1.2

151.6

170.9

177.2

12.7%

3.7%

Raw Materials

0.3

217.4

204.1

204

-6.1%

0.0%

Mineral & Fuels

10.1

184.8

186.3

186.3

0.8%

0.0%

Oils & Fats

0.4

149.3

150.7

148.9

0.9%

-1.2%

Chemicals

9.8

217.7

203.8

211.8

-6.4%

3.9%

Manufactured Goods

26.2

144.1

143.9

143.4

-0.1%

-0.3%

Machinery & Transports

13.4

136.2

143.3

143.4

5.2%

0.1%

Misc. Manufactured

6.4

151.8

135.8

137

-10.5%

0.9%

Other Commodities

0.3

310.9

275.7

253.2

-11.3%

-8.2%

(%)

Source: SECOR calculation based on the Central Department of Statistics and Information data, wholesale Price Index Bulletin 2014.

SAUDI ECONOMIC REPORT 2014 , (SECOR)

29

THIRD: GDP Deflator


GDP deflator measures the

GDP deflator measures the inflation rate at the macro economy level and
targets all consumption, investment and government sectors according to

inflation rate at the macro

contribution of each sector to GDP. Thus, the coefficient of deflation is

economy level; it declined in

considered an indirect measure of the change in the general prices level, which

2014 by 3.1% .

is different from the cost of living index which targets the final consumption
only. It is noted that the GDP deflator declined in 2014 by 3.1%, a matter which
conforms with the trend of cost of living index.
The GDP deflator of the non-oil sector is an important economic indicator for
measurement of inflation because it excludes the impact of change of oil prices

The coefficient of deflation of


non- oil GDP increased from
2.68% in 2013 to 3.39% in
2014.

on the domestic economy. According to the latest CDSI data, the GDP deflation
increased by 3.39% compared with 2.68% in the previous year. The non-oil GDP
deflator recorded the highest annual increase level of 5.52% in 2012then
started to decline gradually in 2013 and to increase again in 2014.
Comparison of annual inflation measures in the domestic market in 2014,
shows that the annual inflation rate of the cost of living index increased by
2.7% while the annual inflation ratio in the non-oil GDP deflator increased by
3.39%. The annual change in the wholesale price index went up by 0.6%.

Table )7( : GDP Deflator

SAUDI ECONOMIC REPORT 2014 , (SECOR)

31

FOURTH: Prices of Construction Materials


The year 2014 witnessed decrease of the prices of most construction materials.
In 2014. The Prices of iron
cables, cement bags decreased,

Price of iron declined from SR 3094.4 per ton in 2013 to SR 2903.6 in 2014, or by

while the prices of timber and


ready mixed concrete increased.

The price of cubic meter of timber increased from SR 2575 in 2013 to SR 2625

a decrease rate of 6.2%. Prices of cables declined by 4.9%, cement bag by 2%.
in 2014 while the price of cubic meter of ready mixed concrete increased
slightly from SR 205.3 in 2013 to 206.3 in 2014.

Table )8( : Average Prices of Some Construction Materials


Construction materials

2012

2013

2014

Amount

Amount

Amount

Annual

Annual

change (2013) change (2014)


(%)

(%)

Ready-mixed concrete

202.0

205.3

206.3

1.6%

0.5%

Iron

Ton

3117.6

3094.4

2903.8

-0.7%

-6.2%

Cement

bag (50 k)

14.17

14.20

13.91

0.2%

-2.0%

Cabling

37.75

37.09

35.27

-1.8%

-4.9%

Timber

2509.8

2575.2

2625.1

2.6%

1.9%

Source: SECOR calculation based on the Department of Statistics and Information data, Bulletin of wholesale Price Index 2014.

Figure )5( : Iron and Cement Prices (2014)

Source: Prepared by SECOR based on CDSI data.

SAUDI ECONOMIC REPORT 2014 , (SECOR)

31

FIFTH: Prices and Inflation Rate in Foodstuff and


Housing
There is an ascending rise in
prices since 2008, where prices
have not fallen since the peak in
that year.

The inflation rates in both groups of foodstuff and housing witnessed a


slowdown as the case with overall inflation rate. The following figure shows
that the overall inflation rate (yellow) follows a trend similar to that of inflation
rate of housing, figure (6/B). The slowdown of inflation does not necessarily
mean that there is a drop in prices whereas prices have really increased as well
as the overall index. There is an ascending rise in prices since 2008.It is noted
that prices have not decreased since their peak level in that year, figure (6/A(.
Figure )6( : Inflation in Foodstuff and Housing

Source: Prepared by SECOR based on CDSI data Indices of the cost of living bulletin (2014).
SAUDI ECONOMIC REPORT 2014 , (SECOR)

32

The international foodstuff


prices index has declined in
2014 due to the abundant
harvest and huge stock of crops
in addition to the power of the
US dollar and the drop of oil
prices.

SIXTH: Comparison of International Foodstuff Prices


with Foodstuff Prices in the KSA
The international foodstuff prices index have declined in 2014 due to the
abundant harvest and huge stock of crops in addition to the power of the US
dollar and the drop of oil prices. The index of FAO is considered as an evidence
based on the activity of trade transactions to measure prices of five main food
items in international markets including sub-indices for prices of cereals, meat,
dairy, vegetable oil and sugar.

Figure )7( : Comparison of Foodstuff Prices in the Kingdom with International Indices (Annual Change)

Source: Prepared by SECOR based on CDSI data, IMF data, and FAO data.
SAUDI ECONOMIC REPORT 2014 , (SECOR)

33

Despite the difference in the methodology of calculation between the three


The trend of foodstuff prices in
the Kingdom no longer followed
the international prices trend in
terms of increase or decrease.
Prices in general, as well as prices
of foodstuff in the Kingdom

indices used in the comparison CDSI, FAO and IMF foodstuff price indices
( Shaded text No.2) , the change trend in prices followed the same trend of the
three indices up to 2008 which witnessed the peak increase of prices. After that
year, the trend of foodstuff prices in the Kingdom no longer followed the
international prices trend in terms of increase or decrease. Prices in general, as

followed an ascending trend

well as prices of foodstuff in the Kingdom followed an ascending trend studying

continuously since 2008.

since 2008 regardless of foodstuff prices in the world. Reviewing the data
related with international foodstuff prices and local foodstuff prices since 1991
and consideration of the correlation between both, shows that there is a strong

There is a strong relation


between

the

international

foodstuff prices and local


foodstuff prices .This relation
started to oscillate after 2008.

relation between these two variables. However, the relation started to oscillate
and the local prices no longer followed the international prices trend in addition
to the weak correlation and slow response. This is evidenced in the scatter of
blue points in the figure after 2008, which represent the ratio between the
international and local prices of foodstuff, (figure 8(.
Despite the decline of world foodstuff prices since 2011, local prices are still

Nothing

supports

the

assumption of time lag between


drop of foodstuff prices in
international
markets.

and

domestic

increasing. The price index of food and drinks increased from 140.5 in 2013 to
145.1 in 2014. Considering the assumption of time lag between drop of
foodstuff prices in international and domestic markets, inflation rates for the
first quarter of 2015 shows that nothing supports this assumption. The decline
is negligible as the inflation rate of foodstuff declined by 0.3% in March 2015.

Figure )8( : Correlation between international foodstuff prices and foodstuff prices in KSA

Source: Prepared by SECOR based on CDSI data, and FAO data.


SAUDI ECONOMIC REPORT 2014 , (SECOR)

34

SEVENTH: Imports and Inflation Rates of Trade


Partners
According to the latest data of CDSI for 2014, the total value of the Kingdom's
The total value of the Kingdom's

imports reached about SR 651,9 billion, by an increase of about 3.4% than the

imports increased by about 3.4%

previous year. Concerning the ranking of the main trade partners, China came

than the previous year.

on top of countries exporting to the Kingdom. The value of the Kingdom's


imports from China reached about SR 87,12 billion representing about 22% of
the total value of imports in 2014, by an annual increase of 11%. USA ranked

The main trade partners that the


Kingdom imports from are China
,USA ,Germany, Japan, South

second with a value of SR 84,7 billion representing about 21% of the Kingdom's
total imports, by an annual decrease of 0.8% than the previous year. Germany
ranked third with a value of about SR 47,1 billion representing 12% of the total

Korea and UAE which came at the

value of the Kingdom's imports, by an annual increase rate of 5.1%. Japan

top of countries exporting to the

ranked fourth with a value of about SR 37,3 billion representing 9% of the total

Kingdom.

value of imports, by an annual increase of 6.1%. South Korea occupied the fifth
rank with imports value of SR 32,3 billion representing 8% of total imports. UAE
ranked sixth with import value of SR 31,0 billion representing about 8% of the
Kingdom's total imports in 2014, by an annual decrease rate of about 2.9%,
followed by India (seventh) with an imports value of SR 23,5 billion

Inflation rates in the data of the

representing 6% of the imports value, by an annual increase of 7.7%. France

top ten trade partners did not

ranked eighth with an imports value of SR 22,1 billion, or 5% followed by Italy

reflect an increase exceeding the

and Switzerland with a value of SR 21,9 billion and SR 17,9 billion respectively.

inflation level in the Kingdom with


the exception of India.

The inflation and change rates in the international prices of products and goods
imported by the Kingdom from its trade partners affect the domestic cost of
living index. Inflation rates in the data of the top ten trade partners did not
reflect an increase exceeding the inflation level in the Kingdom with the
exception of India which recorded the highest inflation rate of about 6.4% in
2014, (figure 9).

SAUDI ECONOMIC REPORT 2014 , (SECOR)

35

CDSI data indicate that the prices of the Kingdom's foodstuff imports increased
in 2014 by 13.8% as well as prices of all components covering processed prepared
foodstuff and drinks by 16.7%, fats and grease by 1.96%, plant products by 7.7%
The Kingdom's foodstuff imports

and animal products by 2.6%, (figure 10).

increased in 2014 by 13.8%.

Despite the fact that there are external factors that lead to decline of the prices
of foodstuff imports, the prices of imports did not decrease whereas the value
of the Saudi Riyal increased against most of the main currencies in the world in
2014. The value of the US dollar increased by 14% against the Euro and

Despite the value of the US dollar


increased, the prices of imports
did not decrease in 2014.

Japanese Yen and by 4% against the S. Korean Won, which are among the most
important countries from which the Kingdom imports products after USA and
China. It is well known that the Saudi Riyal is pegged to the US dollar since 30
years. Thus, the increase of the value of the US dollar against these currencies
means import of goods from these countries (EU and Japan) at prices lower by
14% than the previous prices and 4% lower than the prices of goods imported
from S. Korea.

Figure )9( : Inflation Rates of Trade Partners

Source: Prepared by SECOR based on different global data

SAUDI ECONOMIC REPORT 2014 , (SECOR)

36

However, several studies in other countries proved that the decrease of prices
of imports from trade partners does not necessarily follow the change of
exchange rates and that exporters shoulder part of the change to maintain their
shares in the market.
Generally, it is important to study the disparity between the wholesale prices
(which are linked with the international prices) and the cost of living index
which includes costs of transport, handling, distribution, marketing and profit
margins. This may help in explaining the weak relation between international
and local foodstuff prices.

Figure )11( : Prices of the Kingdom's foodstuff imports

Source: Central Department of Statistics and Information data.

SAUDI ECONOMIC REPORT 2014 , (SECOR)

37

Shaded Text No. 2: Methodology of Calculating Foodstuff Price Indices


1. FAO index of foodstuff prices comprises the average indices of five commodity groups: meat, dairy, cereals, fats and grease,
sugar with calibration of the average exports share for each group for the period 2002-2004. Generally, the overall index includes
73 price levels which are taken into account by FAO commodity experts as a criterion of international prices of food items. Each
sub-index represents the relative average of the prices of goods indicated in the group. The price of the main period comprises
the averages of the prices of the period 2002-2004. The index of meat prices is calculated from the average prices of four types
of meat calibrated according to their average international share in trade exports for the period 2002-2004. The commodities
include two products of poultry and seven products of meat. The index uses 27 price levels. In case of existence of more than one
price level for one type of meat, then it is calibrated according to its assumed fixed trade share. The index of the prices of dairy
products comprises price level of butter, full fat milk powder, skimmed milk powder and cheese, with calibration of the average
according to the international average of the shares of international exports for the period 2002-2004.
The index of cereal prices is calculated from the price levels of corn exports, 16 price levels of rice, the index of wheat prices,
issued by the international Cereal Council, which in itself represents the average of 10 different wheat price levels. Rice price
levels are combined in four groups comprising high and low quality types of rice. Within each group, the simple mean of prices is
computed. Following that, the average relative prices of each of the four types are combined through calibration according to the
assumed trade share of each type. In the ensuing step, the wheat price index issued by the international Cereal Council (after
transfer to the basic price for 2002-2004) is combined with the relative prices of corn, along with the average relative prices
calculated for the rice group as a whole, as well as calibration of each commodity with its average share in trade exports for 20022004.
The index of vegetable oil comprises the average of 10 different oils calibrated according to its average share in each oil product
in the trade exports for the period 2002-2004. The index of sugar prices is derived from the international sugar agreement prices
considering the period 2002-2004 as a base period.

2. The cost of living index used in the Kingdom follows the composition of the international classification of individual
consumption according to purpose (COICOD) - more than 160 food items for the base year 2007. In the context of its role, CDSI
implements a number of programs through which it monitors trends of prices of commodities and services as well as the
changes that take place in this respect from a period to another in accordance with latest internationally adopted statistical
practices and approaches. The program of cost of living index represents one of the most important programs which monitor
trends of the prices of commodities and services in the Kingdom's markets. The contents of the basket of the commodities and
services entered in the cost of living index computation are distributed over 12 main sections. The percentage share of these
sections on the part of consumer varies as reflected in the households expenditure and income survey (2007). The results of
this survey show that more than 40% of the percentage share of the main expenditure sections are represented in two sections:
the food section ranks first in terms of percentage share constituting 21.7% of total percentage share of the main sections which
comprise the overall cost of living index. Therefore, the food items section constitutes one of the main sections with important
presence in all programs, research and studies prepared by CDSI according to their importance to the consumer in the Kingdom.
The housing, electricity, water and fuel section ranks second in terms of percentage share after the food items section,
constituting 20.5% of total percentage share of the cost of living index. The rankings of the sections of house equipment,
maintenance works, clothing and footwear, communications, miscellaneous goods and services, hotels and restaurants,
recreation and culture, education, health and tabaco products follow a sequence according to their percentage shares.

SAUDI ECONOMIC REPORT 2014 , (SECOR)

38

3
LABOUR FORCE

SAUDI ECONOMIC REPORT 2014 , (SECOR)

39

3. Labour force
The number of population in the Kingdom in 2014 has been estimated at about
Around 13.5 million Saudis are

30.7 million of whom 20.7 million Saudis while non-Saudis constitute more than

in the working age, about 7.1


million children and about 741

10 million. Around 13.5 million Saudis are in the working age, about 7.1 million

thousand above the age of 64


years.

The number of Saudi new entrants to the labor market annually exceeds the

children under the age of 14 years and 741 thousand above the age of 64 years.
number of those leaving this market. Almost more than 237 thousand men and
women entered the labor force in 2014 while more than 99 thousand left the

The number of Saudi new


entrants to the labor market
annually are more than 237
thousand men and women in
2014, while more than 99
thousand were outside the labor
force in the same year.

labor force in the same year. This growth in ratio of entrants to the labor force
constitutes a demographic pressure, and does not consist with the volume of
available jobs in the national economy. The increase in the number of
unemployed Saudis who entered the labor force in 2014 has been estimated at
28,772 persons, these increasing the number of unemployed Saudis from
622,533 in 2013 to 651,305 in 2014. The increase in the number of unemployed
Saudis in 2013 was estimated at 19,680 persons.

The growth rate of employment

The growth rate of employment in the private sector accelerated in 2014 to reach

in the private sector reached


about 14.18% in 2014, whereas
employment rate in the

about 14.18% compared with 13.50% in the previous year. Employment rate in

government sector grew by


3.28% in 2014.

resulted in the reduction of unemployment rate of Saudis. In 2014, the

the government sector grew by 3.28% in 2014 compared with 6.40% in the
previous year. However, growth of employment in the private sector has not
unemployment rate remained at the same level of the previous year at 11.7%.
The year 2014 witnessed a significant and unprecedented increase in the number

Despite employment in the

of Saudis not interested in jobs by 297% from 14,103 in 2013 to 55,985 persons

private sector accelerated, the


unemployment rate in 2014
remained at the same level of
the previous year at 11.7%.

in 2014 with males constituting 43% and females 57%. The reason for this
significant increase ratio in 2014 is attributed to refrainment of the youth from
occupying the low skill jobs offered to them by private sector companies which
do not consist with their qualifications whereas most of them are holders of
university degrees. It is noteworthy that, in light of the increased expenditure on
education and training, the private sector's contribution is still below the aspired
level regarding provision of job opportunities to absorb the skilled national
manpower who enjoy higher educational levels.

SAUDI ECONOMIC REPORT 2014 , (SECOR)

41

This is attributed to the fact that most of the private sector jobs are for unskilled
labor with below secondary education recruited from abroad .
The private sector enjoys limited

Study of the current condition of the labor market and the manpower survey

capacities in terms of solving the

data published by CDSI indicate that the private sector enjoys limited

problem of unemployment as

capacities in terms of employment and that it is unable to solve the problem of

most of the jobs provided by the


private sector lack skills and
whereas the national labor are
skilled cadres.

unemployment for two reasons: first: most of the jobs provided by the private
sector lack skills and do not require high education levels, a matter which has
adverse impacts on replacement of expatriate labor by Saudis and employment
of national labor. Most of the national labor are skilled cadres, while most of
the unemployed persons are holders of university degrees. Second: fields and
opportunities in this sector are limited whereas 88% of the new entrants to the
labor market in the private sector were males in 2014 while the females
accounted for only 12%. The unemployment rate among females is the highest
standing at 32.8% while that of males reached only 5.9% in 2014.

The opportunities for females in


the private sector are limited
where the unemployment rate
among them is the highest.

Unemployment rates in the Saudi economy remain a complicated issue which


raises concern of public opinion. The government gives priority to this issue
and adopts multi dimensional strategies to reform the labor market, increase
employment of Saudis in the private sector and improve the levels of
productivity. To review the current condition in a better way, it is particularly
important to understand the nature and characteristics of the Saudi population
in the working age including those entering and leaving the labor force. It is
also important to understand the nature and characteristics of the unemployed
Saudis.

SAUDI ECONOMIC REPORT 2014 , (SECOR)

41

FIRST: Saudi Population in the Working Age


The economic participation rate of the Saudi population, in the age group 15
years and above, reached 41% while 59% of Saudi population remained outside

The economic participation rate


of the Saudi population in the

the labor force. While the participation rate of males in the labor force stood at

working age reached 41% while

65%, the participation rate of females (percentage of female Saudis in the labor

59% of Saudi population

force to the total female Saudis in the working age) increased from 16.4% in
2013 to 17.6% in 2014.

remained outside the labor force.

The Saudi labor force increased by 4% in 2014 while the increase in the
percentage of those leaving the Saudi labor force reached only 1%. This
indicates the accelerated growth of the Saudi laborforce, and that it is

The participation rate of females


in labor force in low, but it is

necessary to take all possible measures to job opportunities to the citizens,

increasing by higher percentage


than males' participation

(table 9). The participation of females in the labor force constitutes a very low
percentage compared with the participation rate of males. However, it is noted
that the participation rate of females in recent years has increased from 14% in
2011 to 18% in 2014, (figure 11).
Table )9( : Saudi Population Within and Outside Labour Force
2013

Saudi population

Annual Change

2014

(%)

Male

Female

Total

Male

Female

Total

Labour Force

65%

17%

41%

65%

18%

41%

(2013 -2014)
4%

Out of the Labour Force

35%

83%

59%

35%

82%

59%

1%

Total

100%

100%

100%

100%

100%

100%

3%

Source: SECOR calculations based on the Central Department of Statistics and Information data, Labour Force Survey 2013-2014 (the second session).
Note: The Saudi population 15 years and above.

Figure )11( : Economic Participation Rate of Saudis

Source: Prepared by SECOR based on CDSI data, Labour Force Survey 2011-2014 (the second session).
SAUDI ECONOMIC REPORT 2014 , (SECOR)

42

The Saudi labor force in 2014


reached about 5.6 million

A. Saudi Labor Force


The Saudi labor force in 2014 reached about 5.6 million persons, of whom 4.4

persons, of whom 79% are males

million males, or 79%, and 21% females. The employment rate of Saudi population

and 21% females.

(at 15 years of age and above) reached 88.3% while the unemployment rate among
the Saudi population (in the working age) reached 11.7%, or 651,305 persons.

The number of unemployed


Saudis reached 651,305 persons
in 2014.

The youth category in the age group 20-39 years constitutes two thirds of the
Saudi labor force. In light of the growing number of population, where the youth
group constitutes the largest portion, there exist demographic pressures in
addition to the necessity of giving priority to provision of job opportunities to the
new entrants to the labor force annually.
Table )11( : Saudi Labour Force by Education Status
(% Of total labor force)

Educational Status
pre-secondary
Secondry or Equivalent
Diploma
University and higher education
Total

Male
22%
30%
7%
20%
80%

2013
Female
1%
3%
2%
14%
20%

Total
23%
33%
10%
34%
100%

Male
19%
33%
7%
19%
79%

2014
Female
1%
3%
2%
15%
21%

Annual Change
Total
21%
36%
10%
34%
100%

% (2013 -2014)
-6%
13%
2%
3%
4%

pre secondary includes: (Illiterate, reads and writes, Primary, Intermediate).


University education and above includes: (Bachelor Degree, High Diploma / Master Dgree, Doctorate).
Source: SECOR calculations based on the Central Department of Statistics and Information data, Labour Force Survey 2013-2014 (the second session).

Figure )12( : Saudi Labor Force by Age Group (2014)

Source: Prepared by SECOR based on CDSI data, Labour Force Survey 2014 (the second session).
SAUDI ECONOMIC REPORT 2014 , (SECOR)

43

Holders of secondary stage


certificates represent the highest
ratio of the Saudi labor force
followed by holders of university
degrees or above.

Holders of secondary stage certificate or equivalent represent the highest ratio


of the Saudi labor force 36% followed by holders of university degrees or above
34% of the Saudi labor force. While the highest rate in the labor force is
concentrated among the male holders of secondary certificates or equivalent
33%, the largest ratio of females is concentrated in holders of university
degrees and above (15% of total female labor force). The large ratio of the

The highest rate in the labor force

entrants to the labor force in 2014 comprised holders of secondary certificates

is concentrated among the male

or equivalent 13%. On the other hand, Saudi labor force holders of below

holders of secondary certificates,

secondary certificates dropped by 6% whereas the ratio of employed and

whereas the largest ratio of

unemployed Saudis in this group has declined. The ratio of employed Saudis

females is concentrated in

holders of below secondary certificates decreased from 22.98% in 2013 to

holders of university degrees.

21.32% in 2014. Moreover, the ratio of unemployed Saudis holders of below

The number of employed Saudis

university certificates declined from 8.51% in 2013 to 7.42% in 2014, (table10).

holders of secondary certificates

The number of employed Saudis holders of secondary certificates has increased

has increased while the ratio of

while the ratio of holders of university degrees and above has declined in 2014.

holders of university degrees and


above has declined in 2014.

The ratio of the unemployed holders of university degrees to the total


unemployed Saudis increased from 49% in 2013 to 51% in 2014. The ratio of the
unemployed holders of secondary certificates increased from 33% in 2013 to
33.4% in 2014, (figure 13).

Figure )13( : Employed and Unemployed Saudis Holders of Secondary, University Degrees and Above (Comparison)

Source: Prepared by SECOR based on CDSI data, Labour Force Survey 2013-2014 (the second session).
SAUDI ECONOMIC REPORT 2014 , (SECOR)

44

Review of the percentage distribution of the employed non-Saudis by


About 56% of the employed

education level shows that the largest ratio represents holders of below

non-Saudis are holders of below

secondary certificates, 56% of total employed non-Saudis while holders of

secondary certificates.

secondary certificates represent 18% of the total. Holders of university degrees


and above represent 21% of the total employed non-Saudis. While the ratio of

Most jobs of non-Saudis do not


require high skills.

employed non-Saudis holders of below secondary certificates declined in 2014,


the ratio of employed non-Saudis holders of university degrees and above
increased in the same year, (figure 14).
In light of the current structure of the Saudi labor market where most jobs of

unskilled

non-Saudis do not require high skills and could be replaced by Saudi labor with

expatriate labor by skilled

low education level, the Saudi economy can not provide (through replacement

national labor is wastage of

process) sufficient job opportunities for national skilled labor who hold higher

human capital.

education degrees. In light of the increased expenditure on education and

Replacement

of

training and the growing number of graduates with university certificates, it is


The challenge in the labor
market lies in creating high skill
jobs

commensurate

with

education level of the Saudi


labor force.

expected that this status could cause more pressures as well as increased
unemployment rates. Replacement of unskilled expatriate labor by skilled
national labor constitutes wastage of human capital. Thus, the challenge in the
labor market lies in raising efficiency of the economy including improvement
of investment environment and direction of investments in the private sector
to create high skill jobs commensurate with education level of the Saudi labor
force and absorption of skilled national labor in the economy.
Figure )14( : Employed non-Saudis by Education Level

Source: Prepared by SECOR based on CDSI data, Labour Force Survey 2013-2014 (the second session).
SAUDI ECONOMIC REPORT 2014 , (SECOR)

45

The largest portion of Saudis work in the government sector representing 66% of
the total employed Saudis, with males constituting about 53% and females about
Employment in the private sector

13%. Growth of employment in the private sector accelerated in 2014 to reach

grew in 2014 by 14.18% compared

about 14.18% compared with 3.27% in the government sector. Moreover, the

to 3.27% in the government sector.

growth rate of total employed Saudis increased by 4.43% in 2014, (table 11).
The number of Saudi employees in the private sector increased substantially from

The Saudi new entrants in the


private sector labor market in 2014

1.09 million in 2013 to 1.25 million in 2014 while the number of employees in the
government sector increased from 3.15 million in 2013 to 3.25 million in 2014.

reached 155 thousand persons of

Review of the percentage distribution of new entrants to the labor market in the

whom 88% are males.

government and private sectors in 2014 shows the increase of the number of
employees in the private sector which reached 155 thousand of whom 136
thousand are males, or 88% while the number of females increased by about 18

The work fields and opportunities

thousand, or not more than 12% of the total increase of the number of employees

for females in the private sector are

in the private sector. On the other hand, the number of employees in the

limited, whereas the largest


percentage of unemployment is
among females.

government sector increased by about 103 thousand employees most of whom


are (60 thousand, or 58%), while the number of males reached 43 thousand, or
42%, (figure 15). It is well known that the fields and opportunities of work in the
private sector are limited for females. Thus, the private sector, in its current
status, could not be relied to solve solving the unemployment problem whereas
the largest ratio of the unemployed comprises females.
Table )11( : Employed Saudis by Economic Sectors
(% Of total Saudis employed by economic sectors)

Sectors

2013

2014

Annual Change

Male

Female

Total

Male

Female

Total

% (2013 -2014)

Government Sector

54.14%

12.54%

66.68%

52.71%

13.23%

65.94%

3.27%

General works Sector

2.92%

0.05%

2.96%

3.18%

0.02%

3.20%

12.97%

Private Sector construction

20.57%

2.56%

23.13%

22.46%

2.82%

25.29%

14.18%

labour work for there own

6.55%

0.14%

6.69%

5.00%

0.11%

5.11%

-1.36%

Family Sector

0.17%

0.01%

0.18%

0.05%

0.08%

0.13%

-0.05%

Non-profitable organization

0.15%

0.12%

0.27%

0.14%

0.09%

0.23%

-0.03%

House labour

0.05%

0.00%

0.05%

0.04%

0.00%

0.04%

-0.01%

Other

0.03%

0.00%

0.03%

0.06%

0.01%

0.07%

0.04%

Total

84.58%

15.42% 100.00% 83.64%

16.36% 100.00%

4.43%

Source: SECOR calculations based on the Central Department of Statistics and Information data, Labour Force Survey 2013-2014 (the second session).
SAUDI ECONOMIC REPORT 2014 , (SECOR)

46

The increase of employment in the private sector could be attributed to the


The increase of employment in

reforms carried in the labor market over the past years. These reforms included:

the private sector could be

expanding the scope of wage benefits, providing incentives to Saudi labor to

attributed to the labor market

continue work in private sector and implementing reforms for work hours in the

reforms in the Kingdom.

private sector. These reforms also included application of the unemployment


insurance system with the contribution of all employers and workers to enhance

Most of Saudis are concentrated


in the activity of general
administration, defense and
social security followed by those
employed in the education
sector.

the social safety net for Saudi labor. These reforms have resulted in the increased
employment of Saudi labor in the private sector.
Review of the distribution of employed Saudis and non-Saudis by activities shows
that most of Saudis are concentrated in the activity of general administration,
defense and social security where their ratio reached 35.8% of the total employed
Saudis followed by those employed in the education sector by 23.6%. The lowest
ratio represents the group employed in activities of international organizations
which reached 0.1%. About 42% of males work in the field of general

The non-Saudi workers are

administration, defense and social security while females are concentrated in

concentrated in the activities of

education and health sectors, by 72% and 13% respectively. The non-Saudi

retail and wholesale trade and


construction.

workers are concentrated in the activity of retail and wholesale trade 22% and
construction activity 21%. The retail, wholesale as well as hotels and restaurants
sectors are adequate targets for Saudization.

Figure )15( : Percentage Distribution of New Entrants to the Labor Market


in the Government and Public Sectors (2014)

Source: Prepared by SECOR based on CDSI data, Labour Force Survey 2014 (the second session).
SAUDI ECONOMIC REPORT 2014 , (SECOR)

47

Most of Saudis work in the services occupations as well as a significant ratio of


Most of Saudis work in the

employed non-Saudis. The ratio of non-Saudi labor in services occupations

services occupations as well as a

increased from 22.27% in 2013 to about 24% in 2014. Most of employed non-

significant ratio of non-Saudis.

Saudis work in assistant basic engineering occupations. Their number reached

Most of the non-Saudis work in


assistant basic engineering
occupations by 15.8% of total
employment in 2014.

1,745,059 persons or 15.8% of total employed in 2014. Saudis do not constitute


more than 1.6% of the total employment in these occupations.
The year 2014 witnessed a minor increase in the ratio of Saudis working in sale
services form about 5% in 2013 to 6.14% in 2014. This increase may be attributed
to the increased number of Saudi women working in commercial centers and

The ratio of Saudis working in

shops which have recently been feminized. The policies of the labor market

sale occupations in 2014

failed in reducing the number of non-Saudis working in sale services as well as

reached about 2.7%, while the

replacement of expatriate labor by Saudis. The ratio of non-Saudis working in

ratio of non-Saudis reached


8.7% of the total employment.

sale services increased from 14.21% in 2013 to 16% in 2014. The ratio of Saudis
working in sale occupations in 2014 reached about 2.7% of total employment,
while the ratio of non-Saudis reached 8.7% of the total employment, (figure16).

Figure )16( : Percentage Distribution of Employed Saudis and non-Saudis by Professions (2014)

Source: Prepared by SECOR based on CDSI data, Labour Force Survey 2014 (the second session).

SAUDI ECONOMIC REPORT 2014 , (SECOR)

48

B. Comparison of Saudization Ratios for 2013 and 2014


A substantial improvement was achieved in Saudization ratios in international
organizations and institutions as well as arts and recreation sectors in 2013 and
Saudization ratios improved in

2014. The Saudization ratio increased in 2014 regarding the sectors of: water,

international organizations and

manufacturing industries, financial activities, communications, retail and

institutions as well as arts and

wholesale trade. On the other hand, Saudization ratios declined in the sectors of:

recreation sectors in 2014.

electricity, mining, trade activities, agriculture, health, transport and hotels and
restaurants. It is noteworthy that the decline of the ratio of Saudization in these

Saudization ratios declined in


the sectors of: electricity, mining,
and real estate activities.

sectors does not necessarily mean decline of the number of Saudis but may be
attributed to increased employment of Saudis in most sectors, but this increase has
been associated with increased number of non-Saudis, a matter which led to
decrease of the Saudization ratios. For example, the number of Saudis in the health
sector increased by 49,862 persons but the number of non-Saudis also increased by
79,988 persons. In the hotels and restaurants sector, the number of Saudis
increased by 96,73 while the number of non-Saudis increased by 108,715 persons.
Figure )17( : Saudization ratios in Economic Sectors

Source: Prepared by SECOR based on CDSI data, Labour Force Survey 2014 (the second session).
SAUDI ECONOMIC REPORT 2014 , (SECOR)

49

C. Saudi Population Out of the Labor Force


Saudi females constitute 70% of the total Saudi population out of the labor

Saudi females constitute 70% of

force while males constitute 30%. Most of the Saudi population out of the labor

the total Saudi population out of


the labor force while males

force lies within the category of holders of below secondary certificates, by a

constitute 30%.

share of 58%, followed by holders of secondary certificates or equivalent, by


36%. The annual growth rate of those leaving the labor force who hold
university degrees and above has declined by 6% while the annual growth rate

The number of Saudi population

of Saudi population out of the labor force reached 1% in 2014.

who are not interested in jobs

More than 7,967 million Saudis in the working age are out of the labor force.

increased from 14,103 persons

Housewives constitute about half of the Saudi population out of the labor force

in 2013 to 55,985 persons in

while students who are studying or on training programs constitute about 39%.

2014.

Despite the low level of the ratio of Saudi population who are not interested in
jobs, constituting only 1% of the total, there is a significant increase in the

There is a refrainment by the

growth rate of this group, the number of whom increased by 297% from 14,103

Saudi youth from lower skill

persons in 2013 to 55,985 persons in 2014. Males constitute 43% while females

jobs offered to them which do

constitute 57% of this group. The reason behind the increasing growth rate of

not consist
qualifications.

this group is the refrainment of the Saudi youth from lower skill jobs offered to

with

their

them by the private sector companies which do not consist with their
qualifications whereas most of them are holders of university degrees.
Table )12( : Saudi Population out of Labor Force by Status
Status

2013

2014

Annual Change %

Male

Female

Total

Male

Female

Total

(2013 -2014)

In school or training

52%

48%

39%

52%

48%

39%

0.3%

Housekeeping

0%

100%

49%

0%

100%

48%

-1%

Retired or Over age

90%

10%

8%

87%

13%

9%

9%

Disability or handicap or health reason

65%

35%

2%

59%

41%

2%

14%

Unwillingness to work

70%

30%

0.18%

43%

57%

1%

297%

Others

62%

38%

1%

52%

48%

1%

9%

Total

30%

70%

100%

30%

70%

100%

1%

Source: SECOR calculations based on the Central Department of Statistics and Information data, Labour Force Survey 2013-2014 (the second session).
Note: The Saudi population in the age of 15 years and above.

SAUDI ECONOMIC REPORT 2014 , (SECOR)

51

SECOND: Unemployment
The various programs and reform efforts in the labor market have contributed
to increase of employment growth rate in the private sector in 2014. Due to
increase of the number of Saudi new entrants to the labor market,
Unemployment rate in 2014

unemployment rate in 2014 remained at its level of 2013 which reached 11.7%.

remained at its level of 2013

The unemployment rate increased slightly among the Saudi youth group (20-

which reached 11.7%.

29 years) from 28.4% in 2013 to 28.6% in 2014. A slight decline took place in the
unemployment rate of both males and females from 6.1% in 2013 to 5.95% in
2014 for males and from 33.2% in 2013 to 32.8% in 2014 for females.

Table )13( : Unemployment Among Saudis


2013

2014

Annual Change %

Unemployment Rate

(2013 -2014)

Male

Female

Total

Male

Female

Total

Unemployment Rate

6.1%

33.2%

11.7%

5.9%

32.8%

11.7%

0.0%

Unemployment Rate in young category (20-29)

17.0%

59.1%

28.4%

16.3%

61.0%

28.6%

0.3%

Unemployment rate pre-secondary

3.8%

16.4%

4.4%

3.7%

14.2%

4.3%

-0.1%

Unemployment Rate of secondary or Equivalent

8.5%

45.9%

12%

7.4%

44.9%

10.8%

-0.7%

Unemployment Rate of secondary diploma

9.0%

19.2%

11%

7.7%

17.1%

10.0%

-1.4%

Unemployment Rate of university and higher education

4.2%

34.3%

16.6%

5.0%

34.0%

17.5%

0.9%

pre secondary includes: (Illiterate, reads and writes, Primary, Intermediate).


University education and above includes: (Bachelor Degree, High Diploma / Master Dgree, Doctorate).
Source: SECOR calculations based on the Central Department of Statistics and Information data, Labour Force Survey 2013-2014 (the second session).

SAUDI ECONOMIC REPORT 2014 , (SECOR)

51

The decline of unemployment rate among females is attributed to the


Unemployment rate among
holders of university degrees
increased to 17.5% in 2014
compared with 16.6% in 2013.

increased employment of Saudi females. The participation rate of the Saudi


women increases at a rapid pace than that of males. Unemployment rate
among holders of university degrees increased to 17.5% in 2014 compared with
16.6% in 2013. Unemployment rate is the highest in this group according to
educational level. On the other hand, unemployment rate declined among
Saudi individuals holding lower educational levels.

Figure )18( : Unemployment Rate Among Saudis

Source: Prepared by SECOR based on CDSI data, Labour Force Survey 2013-2014 (the second session).

SAUDI ECONOMIC REPORT 2014 , (SECOR)

52

4
FOREIGN TRADE

SAUDI ECONOMIC REPORT 2014 , (SECOR)

53

4. Foreign Trade
Total value exports of the Kingdom stood at about SR 1,32 trillion in 2014 or
about 47.5% of GDP. On the other hand, total value of imports amounted to SR
Total value of exports of the
Kingdom stood at 47.5% of GDP,
and total value of imports
amounted to 34% of GDP.

957,6 billion, or 34% of GDP. The current account declined in 2014 as a result
of decline in revenues of oil exports thereby bringing down the current account
surplus to 10.3% of the GDP in 2014 compared to 18.2% in 2013. The surplus of
the current account is expected to decrease further in the future as a result of
decrease in oil prices. Moreover, the merchandise trade of the Kingdom
declined from SR 2.1 trillion in 2013 to SR 1.9 trillion in 2014. As a measure of
degree of economic openness, the merchandise foreign trade of the Kingdom
amo un te d to 6 9 % o f GD P in 2 0 1 4 c o mpar e d to 7 3 % in 2 0 1 3 .

The current account surplus


declined to 10.3% of the GDP in
2014 compared to 18.2% in
2013.

FIRST: Merchandise Exports of the Kingdom


Total value of merchandise exports of the Kingdom decreased by 8.9% from
SR 1,4 trillion in 2013 to SR 1,28 trillion in 2013. Value of oil exports amounted
to SR 1,06 trillion in 2014 or 11.6% down compared to value of oil exports in
2013. This decline in the value of oil exports is mainly attributed to decrease of
oil prices in the last two months of 2014 despite increase of oil production.
Crude oil constitutes 73% of total oil exports. The value of exports of refined
products increased by 22% from SR 104.6 billion in 2013 to SR 127,6 billion in

The value of non-oil exports


increased by 8.4% in 2014

2014.
On the other hand, the value of non-oil exports increased by 8.4% in 2014
recording SR 186,6 billion. Exports of petrochemicals increased by 9.2% to
about SR 143,6 billion while the value of exports of building materials,
agricultural products, foodstuff and re-exported goods decreased by 2.2%
(table 14).

SAUDI ECONOMIC REPORT 2014 , (SECOR)

54

Table )14( : Merchandise Exports of the Kingdom


)Million Riyals(

2013

2014

Oil Exports

Amount
1,207,080

Amount
1,066,590

Crude oil

1,102,478

Refined products

Items

% Share

%Annual
Change

83%

-11.6%

938,959

73%

-14.8%

104,602

127,631

10%

22.0%

Non-oil Exports

172,115

186,627

15%

8.4%

Petrochemicals

131,509

143,647

11%

9.2%

Construction materials

11,753

13,704

1%

16.6%

Agricultural, animal and food products

12,628

13,405

1%

6.2%

Other goods

16,226

15,871

1%

-2.2%

Re-Exported goods

30,328

30,403

2%

0.2%

Total

1,409,523

1,283,620

100%

-8.9%

Source: Central Department of Statistics and Information 2014.

Figure )19( : Exports, Imports and Balance of Current Account

Source: Prepared by SECOR based on CDSI and SAMA data


SAUDI ECONOMIC REPORT 2014 , (SECOR)

55

SECOND: Imports by Main Components


Strong demand for imports continued due to ongoing implementation of
infrastructure projects and the steady growth of domestic consumption. The
value of imports increased by 3.4% from SR 630,5 billion in 2013 to SR 651,8
billion in 2014.

The value of imports increased

Based on the detailed data of imports value, imports of electric devices and
equipment came first with a share of 26% of total imports or 3.5% up from the

by 3.4%, imports of electric


devices and equipment came

value of the previous year. Imports of transport equipment came next

first with a share of 26% of total


imports.

accounting for 17% of total imports or 1% up from that of the previous year.
Imports of foodstuff occupied the third rank by 14% of total imports or 1.4% up
from that of the previous year. Imports of base metals and related products
occupied the fourth rank with a share of 12% or an increase of 2.1% compared
to the previous year. Imports of chemicals and mineral products came in the
fifth rank with a share of 12% and were 8.2% up compared to the previous year.
Timber and jewelry imports occupied the sixth rank with a share of 4% and were
slightly up 0.9% compared to that of the previous year. Finally, imports of
textiles and clothing occupied the last rank with a share of 3% of total imports
and were 7.1% up compared to their value in the previous year (table 15(.
Table )15( :Imports of the Kingdom by Main Components
)Million Riyals(

Items
Machines, appliances and electrical equipment
Foodstuffs
Chemical and metal products
Textiles and clothing
Metals and related products
Wood and jewelry
Transport equipment
Other goods
Total
Source: Central Department of Statistics and Information 2014.

SAUDI ECONOMIC REPORT 2014 , (SECOR)

56

2013

2014

Amount

Amount

165,230
90,341
72,244
18,880
78,102
24,909
107,552
73,324
630,582

171,011

26%

91,626
78,191
20,229
79,759
25,131
108,610
77,317
651,874

14%
12%
3%
12%
4%
17%
12%
100%

% Share

%Annual
Change

3.5%
1.4%
8.2%
7.1%
2.1%
0.9%
1.0%
5.4%
3.4%

THIRD: Exports and Imports to and From the ten


Main Trade Partners of the Kingdom

The ten main countries which

Exports data show the ten main countries which imported from the Kingdom in

imported from the Kingdom in

2014. The USA came first with 18% of the total exports of the Kingdom to the
most important ten trade partners, followed by China and Japan with shares of

2014 are USA, China .Japan,


South Korea. India, Singapore,

17.5% and 17% respectively; Korea 13%; India 12%; and Singapore, Taiwan and

Taiwan, UAE, Bahrain and

the UAE with shares of 5% each. Finally, came Bahrain and France with shares of

France.

4% and 3% respectively (table 16).


On the other hand, imports data show the ten main countries which exported
to the Kingdom in 2014. China came first with a share of 22% of total imports of
the Kingdom from the main ten trade partners, followed by the USA, the

The ten main countries which

percentage share of which declined from 22% in 2013 to 21% in 2014. Germany

exported to the Kingdom in

occupied the third rank with a share of 12%; followed by Japan in the fourth

2014. Are China, USA, Germany,

rank, with a share of 9%; Korea, with the share of 8% (the value of imports from
Korea decreased by 10.2% in 2014). The UAE occupied the sixth rank with 7.9%.

Japan Korea, UAE, India, France,


Italy and Switzerland.

It is noteworthy that the value of the Kingdom's imports from the UAE
decreased by 2.9% in 2014 compared to 2013. Finally came India, France, Italy
and Switzerland with shares of 6%, 5%, 5% and 4% respectively (table 17).
Table )16( : Exports of the Kingdom to the ten main trade partners
)Million Riyals(

Countries

2013
Amount

%Annual

2014

Change

162,460

% Share
18%

Amount

United States

199,060

% Share
19%

China

188,936

18%

160,685

18%

-15.0%

Japan

179,825

17%

156,821

17%

-12.8%

South Korea

131,750

13%

123,557

13%

-6.2%

India

129,444

13%

113,829

12%

-12.1%

Singapore

43,876

4%

46,798

5%

6.7%

Taiwan

51,921

5%

43,918

5%

-15.4%

The United Arab Emirates

38,896

4%

43,694

5%

12.3%

Bahrain

38,081

4%

34,559

4%

-9.2%

France

32,191

3%

31,662

3%

-1.6%

Total

1,033,980

100%

917,983

100%

-11.2%

Source: Central Department of Statistics and Information 2014.

SAUDI ECONOMIC REPORT 2014 , (SECOR)

57

-18.4%

Table )17( : Imports of the Kingdom from the ten main trade partners
)Million Riyals(

Countries

2013

2014

%Annual

Amount

% Share

Amount

% Share

Change

China

78,488

20%

87,122

22%

11.0%

United States

85,376

22%

84,730

21%

-0.8%

Germany

44,812

11%

47,093

12%

5.1%

Japan

35,153

9%

37,306

9%

6.1%

South Korea

36,018

9%

32,336

8%

-10.2%

The United Arab Emirates

31,940

8%

31,019

8%

-2.9%

India

21,822

6%

23,509

6%

7.7%

France

19,663

5%

22,132

5%

12.6%

Italy

20,374

5%

21,929

5%

7.6%

Switzerland

19,740

5%

17,953

4%

-9.1%

Total

393,386

100%

405,129

100.0%

3.0%

Source: Central Department of Statistics and Information 2014.

Figure )21( : Exports and Imports to and from the Kingdom and the Ten Main Trade Partners

Source: Prepared by SECOR based on CDSI data.

SAUDI ECONOMIC REPORT 2014 , (SECOR)

58

FOURTH: Non-oil Exports of the Kingdom


China has occupied the first
rank in non-oil exports of the

Data pertaining to non-oil exports of the Kingdom to the ten main trade
partners in 2014 show that China has occupied the first rank with a share of 23%

Kingdom.

which is 1.5% lower compared to the previous year. The UAE, India, Singapore,
Turkey, Egypt and Jordan came next followed by Belgium, Bahrain and Qatar.

The value of total non-oil


exports increased from 27% in
2013 to 29% in 2014.

The value of total non-oil exports increased from SR 113,886 million in 2013 to
SR 121,509 million in 2014, or 6.7% up. As a measure of economic
diversification, the ratio of non-oil exports to imports increased from 27% in
2013 to 29% in 2014.

Table )18( : Non-Oil Exports of the Kingdom to the ten main trade partners
)Million Riyals(

2013

Countries

Amount
27,858
24,147
10,326
12,791
6,795
6,679
7,034
6,581
5,968
5,707
113,886

China
The United Arab Emirates
India
Singapore
Turkey
Egypt
Jordan
Belgium
Bahrain
Qatar
Total

% Share
24%
21%
9%
11%
6%
6%
6%
6%
5%
5%
100%

Amount
27,441
23,846
14,364
13,863
8,000
7,894
7,380
6,744
6,149
5,828
121,509

Source: Central Department of Statistics and Information 2014.

Figure )21( : Ratio of Non-Oil Exports to Imports

Source: Prepared by SECOR based on CDSI data.


SAUDI ECONOMIC REPORT 2014 , (SECOR)

%Annual

2014

59

% Share
23%
20%
12%
11%
7%
6%
6%
6%
5%
5%
100%

Change
-1.5%
-1.2%
39.1%
8.4%
17.7%
18.2%
4.9%
2.5%
3.0%
2.1%
6.7%

FIFTH: Balance of Current Account


Balance of current account recorded a surplus of SR 288,4 billion in 2014

Balance of current account

compared with a surplus of SR 507,9 billion in 2013, or 43.2% lower. This

recorded a surplus of SR 288,4

surplus, as a percentage of the GDP, decreased from 18.2% in 2013 to 10.3% in

billion in 2014 compared with a

2014 mainly due to decrease of the value of oil exports from 1207080 million in

surplus of SR 507,9 billion in

2013 to SR 1,066,590 million in 2014, or 11.6% down, in addition to increase of

2013.

imports from SR 862,128 million in 2013 to SR 957,686 million in 2014, or


almost 11.1% up, (table 19(.

Table )19( : Current Account


)Million Riyals(

2013

2014

amount

amount

Change %

Oil exports

1,207,080

1,066,590

-11.6%

Other exports

246,585

262,940

6.6%

Imports

862,128

957,686

11.1%

Trade Balance

591,537

371,844

-37.1%

The balance of intangible items

-83,628

-83,410

-0.3%

Current account balance

507,909

288,434

-43.2%

18.2

10.3

-43.4%

Items

(Percentage of GDP)

Source: Central Department of Statistics and Information 2014, SAMA 2014.

SAUDI ECONOMIC REPORT 2014 , (SECOR)

61

Annual

SIXTH: External Transfers oth the Expatriate Labor


Residing in the Kingdom
The transfers of the expatriate
labor represents the main
source of outflows from the
Saudi economy in the account
of intangible items.

The Kingdom is ranked the second in terms of transfers made by the expatriate
labor. It is preceded only by the USA where such transfers average USD 51,8 billion
compared with the Kingdom where the value of transfers amounted to USD 28
billion (SR 105 billion). The transfers of the expatriate labor represents the main
source of outflows from the Saudi economy in the account of intangible items.
However, the pace of transfers was slower in 2014 due to tightened restrictions on

The pace of transfers was slower


in 2014 due to tightened
restrictions on issuance of visas.

issuance of visas as part of the comprehensive reform of the labor market .


Growth of transfers made by the expatriate labor peaked in 2008 when
implementation of many new projects necessitated recruitment of large numbers
of expatriate labor. Labor force survey data indicate the increase of the number of
non-Saudi employment from 4,143,600 workers in 2007 to 4,260,631 workers in

Growth of transfers made by the


expatriate labor peaked in 2008
where the annual change
reached 33.1%.

2008, i.e. an increase of 117,031 expatriate workers compared with an increase of


52,186 workers in the Saudi employment. Moreover, transfers made by expatriate
labor increased substantially in 2013. However, this increase was not due to
increase in the number of non-Saudi workers. According to labor force survey data,
non-Saudi workers increased from 5,992,953 to 6,011,996 workers in 2013, or an
increase of 19,043 workers. The increase of transfers in that year was mainly
attributed to the clearance of accounts for transfers of money abroad due to the
correction of the status of illegal labour at the period when expatriate labour were
given there months to correct their status.
Figure )22( : Transfers of Expatriate Labor and Rate of Annual Change

Source: Prepared by SECOR based on SAMA data.


SAUDI ECONOMIC REPORT 2014 , (SECOR)

61

5
OIL MARKET

SAUDI ECONOMIC REPORT 2014 , (SECOR)

62

5. Oil Market
During 2014, the international oil market witnessed significant changes due to the
international

decline of the growth of the international economy, slowdown of growth of demand

demand for oil increased by

for oil and the increased supply of this resource. According to the data of OPEC, the

1.06%, while the average

average international demand for oil increased by 1.06% to reach 91.2 million barrels

international supply increased

per day while the average international supply increased by 2.39% to reach 92.22

The

average

by 2.39% in 2014

million barrels per day.


The surplus of the international oil balance which stood at about 1.02 million barrels
per day, and the low level of demand led to the drop of oil prices in 2014. The price of
Brent crude declined by 8.78% to reach $ 99.08 per barrel compared with about
$ 108.62 in 2013. On the other hand, the average price of Arabian light crude dropped

The surplus of the international

to $ 97.18 per barrel, by a decline ratio of 8.78%, compared with about $ 106.3 in 2013.

oil balance led to the drop of oil

According to the data of OPEC, the international demand for oil increased in 2014 to

prices in 2014 .

reach 91,2 million barrels per day compared with 90,2 million in 2013. This demand
was fully supported by non-OECD countries, particularly China, Middle East
countries, Latin American countries and African countries. On the other hand,
average demand from Europe and Pacific Ocean countries has declined.
Oil supplies from non-OPEC countries grew by 3.85% to reach 56.35 million barrels
per day compared with about 54.26 million in 2013. This growth of supplies is mainly

The international demand for oil

attributed to the increased production of US rock oil. The US total production of

was fully supported by non-

crude oil, gas liquids and fossil fuel increased from 11 million barrels/day to 12.7

OECD countries while oil

million barrels/day while production of crude oil went up from 7.5 million

supplies grew as a result of the

barrels/day to 8.7 million including 3.5 million barrels/day of rock oil.

increased production of US rock

Despite the accelerated growth of US production of light sweet crude over the past

oil.

few years, the discontinuity of production in a number of countries resulted in the


delay of the impact of the said increase in US supplies on oil prices. The US production
increased by about 3 million barrels/day over the past five years since the third
quarter of 2009. However, the discontinuity of production in five countries (Libya,
Yemen, Sudan, Iran and Syria), the total production of which stands at 2.4 million
barrels/day, has provided alternative markets for the US oil supplies in an
easy way.
SAUDI ECONOMIC REPORT 2014 , (SECOR)

63

The year 2014 witnessed the


beginning of the decline of oil

FIRST: Oil Prices


The year 2014 witnessed the beginning of the decline of oil prices. The largest

prices. In particular, the largest

decline of prices took place in the last two months of a foresaid. According to

decline of prices took place in the

OPEC data, all world oil prices declined during 2014. The average price of Arabian

last two months of the said year .

light crude reached $ 97.18 per barrel, with a decrease ratio of 8.78% compared

The average price of Arabian


light crude reached $ 97.18 per

with about $ 106.53 per barrel in 2013. The average price of North sea oil (Brent)
decreased by 8.78% to reach $ 99.08 per barrel compared with about $ 108.62 in

barrel, compared with about

2013. The average price of Dubai oil reached $ 96.71 per barrel during 2014, by a

$ 106.53 per barrel in 2013.

decline ratio of 8.29% compared with about $ 105.45 in 2013, (table 20).
Table )21( : Oil Prices
$/ barrel
Types of oil

Opec Reference Basket


Arab Light
Basrah Light
Bonny Light
Es Sider
Girassol
Iran Heavy
Kuwait Export
Qatar Marine crude
Merey
Murban
Oriente
Saharan Blend
Other Crudes
Brent
Dubai
Isthmus
LLS
Mars
Minas
Urals
WTI
Source:OPEC , Oil market report Jan 2015.
SAUDI ECONOMIC REPORT 2014 , (SECOR)

Annual

2013

2014

105.87
106.53
103.6
111.36
108.51
109.14
105.73
105.04
105.52
96.66
108.21
97.74
109.38

96.29
97.18
94.45
100.85
98.51
99.19
96.18
95.32
96.39
86.88
99.45
87.31
99.68

-9.05%
-8.78%
-8.83%
-9.44%
-9.22%
-9.12%
-9.03%
-9.25%
-8.65%
-10.12%
-8.10%
-10.67%
-8.87%

108.62
105.45
105.16
107.33
102.24
107.41
108
97.96

99.08
96.71
93.65
96.92
92.93
98.68
98.08
93.26

-8.78%
-8.29%
-10.95%
-9.70%
-9.11%
-8.13%
-9.19%
-4.80%

64

Change %

Follow up of oil prices in the first quarter of 2015 shows that the month of
The month of January witnessed

January witnessed the lowest level of oil prices. The price of Arabian light oil

the lowest level of oil prices,

barrel reached $ 44.47 then prices started to improve in February of the same

then prices started to improve in

year to reach $ 53.78. The price of Brent crude increased to $ 60 per barrel

February and March.

during March while the price of the Arabian light crude reached $ 52.2 per
barrel in March, (figure 23).
Figure )23( : Oil Prices

Source: Prepared by SECOR, based on OPEC data, oil markets report (2015).
SAUDI ECONOMIC REPORT 2014 , (SECOR)

65

SECOND: World Oil Production


OPEC data indicate that the average world production of oil during 2014
The average world production of
oil during 2014 increased by
2.39% compared with the
previous year.

reached about 92.22 million barrels/day, by an increase of 2.39% compared with


about 90.07 million barrels/day in 2013. The growth of supply exceeded the
growth rate of world demand for oil. This increase is attributed to the increased
average total production supply from non-OPEC countries by 3.85% to reach
56.35 million barrels per day in 2014 compared with about 54.26 million in 2013.
Table )21( : Average World Oil Production
Million barrel/ day

Countries

2013

2014

Algeria
Angola
Ecuador
Iran
Iraq
Kuwait
Libya
Nigeria
Qatar
Saudi Arabia
United Arab Emirates
Venezuela
Total Opec
Americas
Europe
Asia Pacific
Total OECD
Other Asian
Latin america
Middle East
Africa
Total DCs
FSU
Other Europe
China
Total Other regions
Processing gains
Total Non-Opec supply
Opec natural gas supplies
World Supply

1.16
1.74
0.52
2.67
3.04
2.82
0.93
1.91
0.73
9.59
2.74
2.36
30.21
18.16
3.58
0.49
22.23
3.61
4.78
1.36
2.4
12.15
13.41
0.14
4.24
17.78
2.1
54.26
5.6
90.07

1.15
1.66
0.54
2.77
3.27
2.77
0.47
1.91
0.72
9.68
2.76
2.37
30.07
19.86
3.59
0.52
23.97
3.56
5.03
1.34
2.42
12.35
13.43
0.14
4.26
17.83
2.2
56.35
5.8
92.22

Source:OPEC , Oil market report Jan 2015.


SAUDI ECONOMIC REPORT 2014 , (SECOR)

66

Annual Change
%
-0.86%
-4.60%
3.85%
3.75%
7.57%
-1.77%
-49.46%
0.00%
-1.37%
0.94%
0.73%
0.42%
-0.46%
9.36%
0.28%
6.12%
7.83%
-1.39%
5.23%
-1.47%
0.83%
1.65%
0.15%
0.00%
0.47%
0.28%
4.76%
3.85%
3.57%
2.39%

In particular, the average production of OECD countries increased by 7.83%


The US rock oil constituted the
major portion of oil production
increase.

from 22.23 million barrels per day in 2013 to 23.97 million in 2014. The bulk of
growth took place in the production of America countries. The US rock oil
constituted the major portion of this increase which reached 9.36% raising from
18.16 million barrels/day in 2013 to 19.86 million in 2014. As for non-OPEC
countries, the average production of Soviet Union (previously) during 2014
increased only by 0.15% to reach 13.43 million barrels/day in 2014. During the
first quarter of 2015, the average world oil production increased by 1.6%.
Figure )24( : World Oil Production

Source: Prepared by SECOR, based on OPEC data, oil markets report (2015).
SAUDI ECONOMIC REPORT 2014 , (SECOR)

67

Despite the saturation of the market, there is also an increase in the production of
OPEC countries. There is a direction in some OPEC member states such as Saudi
There is also an increase in the

Arabia, UAE and Kuwait not to reduce production. The Kingdom's decision not to

production of OPEC countries in

reduce production indicates its priority to increase its market share and maintain it.

2014, Iraq production in 2014

Therefore, the Kingdom's production in 2014 increased by 0.8% than the previous

also increased by 7.5% than


2013.

year. Iraq production in 2014 also increased by 7.5% than 2013, representing 225
thousand barrels/day. Libya oil supplies shrank in 2014 by 49.5%, lower than the
previews year by 454 thousand B/d Despite the sanctions imposed on Iran exports,
its production increased in 2014 by 3.75% or by about 71 thousand barrels/day.

Figure )25( : Growth of Oil Production in Selected Countries from OPEC and USA

Source: Prepared by SECOR, based on OPEC data, oil markets report (2015).
SAUDI ECONOMIC REPORT 2014 , (SECOR)

68

THIRD: World Demand for Oil


According to OPEC estimations, the average world demand on oil during 2014
The average world demand on

increased by 1.06% to reach 91,2 million barrels/day compared with about 90,2

oil during 2014 increased to

mbpd in 2013. This increase was mainly supported by non-OECD countries.

reach 91.2 million barrels/day

China's average demand increased by 3.87% to reach 10.46 million barrels/day

compared with about 90,2

compared with about 10.07 mbpd in 2013. It is well known that Chinese

mbpd in 2013.

government's long term energy security strategy is based on purchasing crude


oil stocks at times when prices drop. Thus, the increase of demand for oil is

This increase was mainly


supported
countries.

by

non-OECD

attributed to China's efforts aimed at boosting these stocks. China enjoys crude
oil stocks sufficient for 30-day consumption .
China aims at ensuring that its stocks cover 100-day consumption by 2020.
With the drop of prices, china resorts to increase its purchases of crude oil to
build strategic stock.
Table )22( : World Oil Demand
Million barrel/ day

Countries

2013

2014

Total OECD
American countries
Europe
Oceania
Total DCs
Other Asia
Latin America
Middle East
Africa
Total Other regions
FSU
Other Europe
China
Total World Demand

46.06
24.09
13.64
8.33
29
11.06
6.5
7.81
3.63
15.18
4.48
0.63
10.07
90.24

45.78
24.19
13.45
8.14
29.76
11.27
6.69
8.06
3.74
15.66
4.54
0.66
10.46
91.2

Source:OPEC , Oil market report Jan 2015.

SAUDI ECONOMIC REPORT 2014 , (SECOR)

69

Annual
Change %
-0.61%
0.42%
-1.39%
-2.28%
2.62%
1.90%
2.92%
3.20%
3.03%
3.16%
1.34%
4.76%
3.87%
1.06%

Average demand increased in Middle East countries by 3.20% to reach 8.06


Average demand increased in

million barrels/day compared with about 7.81 mbpd in 2013, in Latin American

Middle East countries, Latin

countries by 2.92% to reach 6.69 million barrels/day compared with about 6.5

American countries, African

mbpd in 2013 and in African countries by 3.03% to reach 3.74 million

countries, whereas it declined

barrels/day compared with about 3,63 mbpd in 2013. Average demand declined

in European and Pacific Ocean

in European and pacific ocean countries due to weak economic growth. The

countries.

average world demand for oil increased during the first quarter of 2015 by 0.1%
to reach 91,4 million barrels/day compared with about 91,3 mbpd in the first
quarter of 2014.
Figure )26( : World Oil Demand

Source: Prepared by SECOR, based on OPEC data, oil markets report (2015).

SAUDI ECONOMIC REPORT 2014 , (SECOR)

71

FOURTH: Kingdom's Oil Production and Consumption


The Kingdom's crude oil production increased by 27,5 million barrels from
The Kingdom's crude oil

3517.6 million barrels in 2013 to 3545.1 million barrels in 2014. The Kingdom's

production increased

from

production peaked in June 2014 to reach 10,005 million barrels/day under the

3517.6 million barrels in 2013

increased world demand for oil and the increase of prices to about $ 120 per

to 3545.1 million barrels in

barrel. However, the decline of world demand and drop of prices in November

2014.

lead to the decrease of the Kingdom's production to 9,610 million barrels/day.


Figure )27( : Local Consumption of Oil

Source: Prepared by SECOR based on Ministry of Petroleum and Mineral Resources data.

SAUDI ECONOMIC REPORT 2014 , (SECOR)

71

Total domestic consumption of refined products, crude oil and natural gas
increased during 2014 to reach 1516.82 million barrels compared with about
1423.8 million in 2013, (table 23). This increase in domestic consumption is
Total domestic consumption of

attributed to the increase of overall consumption by 5.4% and the consumption of

refined products, crude oil in


the Kingdom by 6.5%.

oil industry sector by 17.4%.


Demand for oil in the Kingdom comprises the needs of refineries and direct
combustion for electricity generation. The increase in demand for oil is basically
attributed to the operation of SATORP refinery in Jubail industrial city, the refining
capacity of which reached 0.4 million barrels/day in the last quarter of 2013, thus
leading to the increased consumption of refineries since the beginning of the year.

Table )23( : Local consumption of Refined Products, Crude Oil and Natural Gas
(Million barrels)

Product

Annual

2013

2014

Liquefied petroleum gas

12.27

11.48

-6.4

Premium gasoline

184.14

190.71

3.6

Jet fuel and Kerosene

25.56

27.28

6.7

Diesel

259.40

261.22

0.7

Fuel oil

107.47

125.86

17.1

Crude oil

176.94

202.36

14.4

Asphalt

20.94

28.59

36.5

Lubricating oil

1.59

1.92

21.1

Crude oil

496.44

504.09

1.5

Sub-total

1284.72

1353.51

5.4

Liquefied petroleum gas

2.99

3.71

24.0

Fuel oil

4.84

13.72

183.3

Diesel

6.92

12.67

83.0

Fuel gas

20.29

20.56

1.3

Crude oil

0.07

0.1

42.9

Crude oil

100.8

110.54

9.7

Others

3.15

2.01

-36.2

Sub-total

139.07

163.31

17.4

Grand Total

1423.8

1516.82

6.5

Change %

A. General consumption

B. Oil industry consumption

Source: Ministry of Petroleum and Mineral Resources.


SAUDI ECONOMIC REPORT 2014 , (SECOR)

72

6
PUBLIC FINANCE

SAUDI ECONOMIC REPORT 2014 , (SECOR)

73

6. Public Finance
FIRST : Public Finance
Preliminary data of the MOF show that actual data of 2014 budget was
significantly different from the estimated data which expected a balanced budget
The Kingdom's budget of 2014

where revenues are equal to expenditure at the level of SR 855 billion. Below are

recorded a deficit with a value of

the main features of the budget:

SR 54 billion.

The Kingdom's budget of 2014 recorded a deficit, for the first time, in 2009 with a
value of SR 54 billion (USD 14.4 billion), or 1.9% of the GDP. Although the actual
revenues exceeded the estimated revenues by 22.3%, yet the actual expenditure
exceeded the estimated expenditure by a larger rate (28.7%). These expenditure
constituted about 39% of the GDP, leading to a deficit in the budget .

Figure )28( : Budget Performance

Source: Prepared by SECOR, based on Finance Ministry data, Ministry`s of finance statement about the national budget for the year 1436/1437 H

SAUDI ECONOMIC REPORT 2014 , (SECOR)

74

Government spending in the estimated budget of 2015 continued to grow


despite fluctuations of the oil markets which led to decrease of prices. This
Government spending in the estimated
budget of 2015 continued to grow
despite fluctuations of the oil markets.

confirms continuity of the Kingdom in supporting the development projects


which enhance sustainability of development and growth. Estimated
expenditure amounted to SR 860 billion compared to 855 billion in the previous
year, or only 0.6% up. It is noteworthy that the 2015 budget is the largest ever
in the Kingdom. This increase in spending is attributed to increase in current
spending by 2.8%. However, capital spending decreased by 3.8% compared to
estimated expenditure in the 2014 budget. On the other hand, public revenues
were estimated at about SR 715 billion, of which oil revenues account for 84%,
and with an decrease of 16.4% compared to the estimated revenues in 2014
budget, (table 24).

Table )24( : Public Finance by Sectors


(Million Riyals)

Items

2013

2014

2015

Projections

Actuals

%Change

Projections

Actuals

%Change

Projections

Total revenues

829,000

1,156,361

39.49%

855,000

1,046,000

22.34%

715,000

Oil revenues

727,000

1,035,046

42.37%

735,000

931,000

26.67%

581,300

Other revenues

102,000

121,315

18.94%

120,000

115,000

-4.17%

133,700

Total Expenditures

820,000

976,014

19.03%

855,000

1,100,000

28.65%

860,000

Current expenditures

537,759

664,047

23.48%

566,716

748,000

31.99%

582,720

Capital expenditures

282,241

311,967

10.53%

288,284

352,000

22.10%

277,280

Surplus/deficit

9,000

180,347

-54000

-145,000

Source: Ministry of Finance , Ministry's of Finance statment about the national budget for 2015

SAUDI ECONOMIC REPORT 2014 , (SECOR)

75

SECOND: Public Revenues for 2014


Preliminary data of the MOF show that actual revenues amounted to SR 1046
billion in 2014, or 22.3% up from the estimated revenues in the budget.
However, they are about SR 110 billion (or 9.5%) less than the actual revenues
The actual revenues amounted

of 2013 which are the least revenues since 2010. The reason behind decrease of

to SR 1046 billion in 2014, or

actual revenues was the decline of oil revenues by 10% which is attributed to

22.3% up from the estimated

decline of oil prices by 8.8% despite increase of oil production by 1% to an

revenues in the budget.

average of 9.7 mbpd in 2014. Actual oil revenues decreased by 10%, compared
to the previous year, to about SR 931 billion, or 89% of total revenues. On the
other hand, non-oil revenues decreased by 5.2%, compared to the previous year,
to almost SR 115 billion. Despite the slight increase in the percent distribution
of other non-oil revenues to account for 11% of total public revenues, which is
the highest since 2011, yet the Kingdom is still dependent, to a great extent, on
oil revenues. This makes it susceptible to fluctuations of world demand for oil.
Figure )29( : Public Revenues

Source: Prepared by SECOR, based on Finance Ministry data, Ministry`s of finance statement about the national budget for the year 1436/1437 H
SAUDI ECONOMIC REPORT 2014 , (SECOR)

76

THIRD: Public Expenditure for 2014


Actual expenditure amounted to SR 1100 billion in 2014, with an increase of SR 124
billion, or by a growth of 12.7%, compared to actual expenditure in 2013 and 28.7%
up compared to the estimated expenditure in the budget. This volume of increase
in actual expenditure relative to estimated expenditure is the largest since 2011
Actual expenditure amounted

and is attributed to increase of spending on implementation of King Abdullah

to SR 1100 billion in 2014, with

Project of Expansion of the Two Holy Mosques and related compensations for

an increase of SR 124 billion,

property expropriation as well as increase of spending on other development and

compared

services projects and the assistance provided to other countries.

to

expenditure in 2013.

actual

Capital expenditure increased by 12.8% from the level of the previous year. Capital
spending is important for support of non-oil sector growth thereby reducing
reliance on oil sector as a main source of income. Although capital expenditure, as
a percent of public expenditure, increased over a period of ten years from 13.2% in
2004 to 32% in 2014, yet current expenditure still account for the largest share
almost 68% of total expenditure.
Figure )31( : Public Expenditure

Source: Prepared by SECOR, based on Finance Ministry data, national budget for the year 1436/1437 H
SAUDI ECONOMIC REPORT 2014 , (SECOR)

77

Main items of Spending on Key Sectors in the Budget:


Financial allocations of human resources development sector amounted to SR
209 billion in 2014, or 3% up compared to the amounts allocated to the sector
The increase included all

in 2013 and accounted for 24.5% of total expenditure approved by the budget.

spending items in the budget of

These amounts were allocated mainly for development of the education

2014, except for items of public

process, provision of related appropriate environment by increasing the

administration

absorptive capacity of universities, construction of new school buildings and

and

public

facilities and subsidies

rehabilitation of the existing ones and providing them with security and safety
devices, adoption of e-education, implementation of King Abdullah Project for
Development of Public Education as well as allocations assigned for King

Allocations assigned for human


resource increased by 3% , and
transport and communications
sector increased by 6.5%.

Abdullah External Scholarship Program.


Allocations assigned for transport and communications sector amounted to
SR 23.5 billion in 2014, or 6.5% up compared to allocations made in 2013
budget. These allocations are mainly directed for implementation of intra-city
public transport projects and programs; approved projects of roads, seaports,
railroads, airports and postal services; and projects of studying and designing
main and secondary roads. Such allocations assigned to transport projects
represent a vital step in light of the dire need for provision of public transport
means, particularly for working women.

Table )25( : Distribution of Budget Allocations for the Fiscal Year 1435/1436H (2014) by Sectors
(Million Riyals)

Items
human Resource Development
Transport & Communications
Economic Resource Development
Health Service & Social Development
Infrastructure Development
Municipal Services
Defense & National Security
Public Administration, Public Utilities & General Items
Government Specialized Credit Institutions
Subsidies
Total

2013
Annual

Amount

% Share

Amount

24.8%

209,296

Change %
3.03%

% Share

203,147

Change %
20.94%

22,063

7.28%

2.7%

23,506

6.54%

2.7%

46,696

13.47%

5.7%

49,537

6.08%

5.8%

70,938

15.75%

8.7%

78,166

10.19%

9.1%

11,702

11.18%

1.4%

13,540

15.71%

1.6%

31,729

24.62%

3.9%

34,610

9.08%

4.0%

251,325

18.62%

30.6%

302,859

20.50%

35.42%

119,948

11.53%

14.6%

84,558

-29.50%

9.89%

14,950

38.62%

1.8%

15,375

2.84%

1.80%

47,502

44.65%

5.8%

43,553

-8.31%

5.09%

820,000

18.84%

4.27%

100.0%

100.0%

Source: Ministry of Finance , Ministry of Finance statment about the national budget for 2015
SAUDI ECONOMIC REPORT 2014 , (SECOR)

2014
Annual

78

855,000

24.5%

Transport is one of the key obstacles which limit employment of women in the
shortage of public transport means and high cost of private transport means.
Allocations assigned for economic resources development sector amounted to
SR 49.5 billion in 2014, or 6.1% up compared to allocations made in 2013
budget, and account for 5.8% of the total expenditure approved in the budget.
These allocations are directed mainly for implementation of the new projects
In the budget of 2014 the
allocations
economic

assigned
resources

for
sector

increased by 6.1%, and the


allocations assigned for health
and

and expansion of the existing ones; provision of drinking water; enhancement


of water sources; development of sanitation services; construction of dams;
drilling of wells; detection of water leakages; as well as establishment of new
desalination plants, including those working by solar energy, and development
of the existing ones .
Allocations assigned for health and social development sector amounted to

social

development,

infrastructure

and

SR 78 billion in 2014, or 10.2% more than the allocations made in 2013 budget

municipalities services sectors

and account for 9.1% of total expenditure approved in the budget. They were

rose by 10.2%, 15.7%, and 9.1%

directed for construction of new hospitals and reference laboratories for blood

respectively

banks, medical centers and polyclinics, as well as social development projects


including sport clubs and rehabilitation centers .
With respect to infrastructure development sector, 2014 budget allocations
amounted to SR 13.5 billion, or 15.7% up compared to 2013 budget allocations
and accounts for 1.6% of the total expenditure approved in the budget.
Regarding municipal services sector, 2014 budget allocations stood at SR 35
billion, or 9.1% up from 2013 budget allocations, and accounted for 4% of the

Allocations of the national


security and defense sector and

total allocations approved in the budget. These allocations did not include the
expenditure funded from the direct revenues of the municipalities with an

the Specialized Government

amount of about SR 4.4 billion, and were directed for implementation of rain

Credit Institutions rose in 2014

water drainage projects; prevention of torrential rain risks; protection of the

budget by 20.5% and 2.8%

vallies; provision of equipment and machinery for construction of tunnels and

respectively

bridges in some roads and streets inside cities; and development of the existing

allocations

.whereas
of

public

administration, public facilities


and general items deceased by
29.5% in 2014.

ones to facilitate traffic flow and limit pertinent congestions.


National security and defense sector received about SR 302 billion in 2014
budget, or 20.5% up compared to 2013 budget allocations and accounted for
35.3% of the total expenditure approved in the budget. Most of this increase
comes from reclassification of some amounts allocated to this sector with the

SAUDI ECONOMIC REPORT 2014 , (SECOR)

79

amounts allocated to the category of public administration, public facilities


and general items with a value of SR 84 billion in 2014 which is 29.5% less
compared to the amount allocated in 2013 budget and accounted for 9.9% of
total expenditure approved in the budget .
The priorities of this spending
were consistent with the
priorities of the budgets of the
previous years.

Finally, the 2014 budget allocated about SR 15.4 billion for the Specialized
Government Credit Institutions, or 2.8% more than the amount allocated in
2013 budget and accounted for 1.8% of the total expenditure approved in the
budget. This amount is mainly assigned for provision of easy-term credit for
support of industrial, agricultural and real estate sectors.
Although spending in 2014 budget included all sectors, yet the priorities of this
spending were consistent with the priorities of the budgets of the previous
years. National security and defense sector received the largest share of
allocations with expenditure of about 35.3% of the total expenditure. Human
resources development sector came next with a share of 24.5% of total
expenditure.
Regarding the growth rate of allocations, the national security and defense
sector came first with an increase of 20.5% compared to allocations of the
previous year (mainly as a result of reclassification), followed by infrastructure
sector 15.7%.

Figure )31( : Distribution of Budget Allocations of the Year 1435/1436 (2014) by Key Sectors

Source: Prepared by SECOR, based on Finance Ministry data, the national budget for the year 1436/1437 H
SAUDI ECONOMIC REPORT 2014 , (SECOR)

81

FOURTH: Public Debt


Despite the budget deficit, the public debt continued to decline reaching
The public debt declined by
26.4% reaching SR 44,3 billion
by the end of 2014.

SR 44,3 billion by the end of 2014 compared to SR 60,1 billion by the end of 2013,
or 26.4% down and equivalent to 1.6% of the GDP. Accordingly, the Kingdom is
considered the country with the least ratio of debt as a percent of GDP.
In 2002, the Kingdom recorded the highest public debt in its history with a
value of SR 685,2 billion, or 96.9% of the GDP. However, the government
prepared a plan for amortization of debt and succeeded in repayment of about
SR 640,9 billion since 2002.
Table )26( : Public Debt as a Percent of GDP
(Million Riyals)

Change %

2013

2014

GDP at current prices

2,791,259

2,821,722

1.09%

Public debt

60,118

44,260

-26.38%

Ratios of public debt to GDP

2.15%

1.57%

(2013-2014)

Source: Ministry of Finance , Ministry of Finance statment about the national budget for 2015

Figure )32( : Public Debt

Source: Prepared by SECOR, based on Finance Ministry data, Ministry of finance statement about the national budget for the year 1436/1437 H

SAUDI ECONOMIC REPORT 2014 , (SECOR)

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7
RANKING OF THE KINGDOM
IN INTERNATIONAL INDICES

SAUDI ECONOMIC REPORT 2014 , (SECOR)

82

7. Ranking of the Kingdom international Indices


FIRST: Global Competitiveness Index
The global competitiveness report for 2014 issued by the World Economic Forum,
The kingdom ranked 24th in the

indicates that the Kingdom's ranking in the global competitiveness index has

global competitiveness index in

declined by four ranks to reach the 24th rank out of 144 classified countries

2014.

compared with 20th rank in 2013. The global competitiveness index adopts three
main indices comprising a number of sub-indices (shaded text No. 3). The decline of

The higher education and


training index recorded the
highest decline in the subindices of competitiveness.

the Kingdom's ranking covered the three main indices which constitute the overall
index: Basic Requirements Index where the Kingdom occupied the 15th rank, the
Efficiency Enablers Index where the Kingdom ranked 33rd and the Innovation and
Development Index where the Kingdom ranked 32nd at the global level.
Concerning the positive aspects accomplished by the Kingdom, the macroeconomic
environment quality index remained at the 4th rank internationally through

The Kingdom still faces some

achievement of positive outcomes in related indices. The Kingdom ranked 2nd at the

challenges in terms of improving

global level in the decrease of public debt ratio to GDP and ranked 6th in the index

its ranking in some other sub-

of the ratio of public debt to GDP. The Kingdom still faces some challenges in terms

indices.

of improving its ranking in some other indices such as: index of the ratio of women
participation in labor market compared to males where the Kingdom ranked 141th
and the index of imports as percent of GDP where the Kingdom ranked 120th.
Figure )33( : Ranking of Countries According to Global Competitiveness indices in 2014/2015

Source: Prepared by SECOR, based on the World Economic Forum data, global competitiveness Report 2014/2015
SAUDI ECONOMIC REPORT 2014 , (SECOR)

83

Table )27( : Kingdom`s Performance according to Global Competitiveness Indices


Ranking for

Ranking for

2014-2013

2015-2014

Basic requirements

14

15

-1

Institutions

20

25

-5

Infrastructure

31

30

Macroeconomic environment

Health and primary education

53

50

Efficiency enhancers

27

33

-6

Higher education and training

48

57

-9

Goods market efficiency

27

35

-8

Labor market efficiency

70

64

Financial market development

27

30

-3

Technological readiness

41

45

-4

Market size

23

20

Innovation and sophistication factors

29

32

-3

Business sophistication

28

30

-2

Innovation

30

33

-3

Sub-indicators

2013-2014 rating - out of 148 countries.


2014 -2015rating - out of 144 countries.
Source: World Economic Forum, The Global Competitiveness Report of the year 2014/2015

SAUDI ECONOMIC REPORT 2014 , (SECOR)

84

Change

SECOND: World Prosperity Index


The Kingdom ranked 47th

The Kingdom ranked 47th internationally according to the world Prosperity

internationally according to the

index for 2014 issued by the British Legatam Institute. The index which

world welfare index for 2014.

comprises 142 countries indicated that the Kingdom has advanced by three
ranks than its 50th rank in 2013. This index is based on eighth criteria to
determine the welfare enjoyed by a country which are: economy,
entrepreneurship initiatives, opportunities, governance, education, health,
safety and security, personal freedom, and social capital. The Kingdom has
enhanced innovation through devotion of attention to human capital which is

The Kingdom jumped by 22


ranks in the international

the basic and important pillar for all innovated changes. The Kingdom has

innovation index of education

developed human capital at various fronts including: devotion of attention to

pillars in 2014.

education for which the country allocated 25% of the total allocations of the
state budget in addition to the reform of the education system. The Kingdom
facilitates expansion of higher education institutions through establishment of
international standard universities locally. Thanks to all these efforts, the
Kingdom advanced in the international innovation index of education pillars
from the 50th rank in 2013 to the 28th rank in 2014.

Kuwait
Saudi Arabia

SOCIAL CAPITAL

Emirates

PERSONAL FREEDOM

United Kingdom

SAFETY & SECURITY

New Zealand
United States

HEALTH

Switzerland

7
3
18
11
8
31
35
49

EDUCATION

3
1
15
17
28
10
16
24

GOVERNANCE

1
2
3
10
13
28
36
47

OPPORTUNITY

ECONOMY

Norway

ENTREPRENEURSHIPand

Countries

Rank

Table )28( : Ranking of Countries According to the Prosperity Legatum Index in 2014

7
1
2
12
10
32
44
49

5
21
7
11
20
39
30
28

5
3
20
1
19
37
40
45

6
11
10
31
21
26
34
72

2
12
1
21
10
55
83
136

1
9
2
7
12
43
62
23

Source: Legatum Institute, The 2014 Legatum Prosperity Index

SAUDI ECONOMIC REPORT 2014 , (SECOR)

85

THIRD : Energy Sustainability Index


The Kingdom ranked 68th internationally out of 129 countries according to the
energy sustainability index for 2014 issued by the World Energy Council. The
The Kingdom ranked 68th

index indicated that the Kingdom has declined by 17 ranks than its rank in

internationally according to the

2013. This index classifies the various countries in terms of ability to provide a

energy sustainability index for

safe and stable energy system and shouldering its costs along with

2014.

conservation of environment.
The Kingdom ranked the 68th in terms of safe energy, 7th in the currency value
of energy and its ability to shoulder its costs and the 125th in terms of
environment sustainability and pollution impact.

Table )29( : Ranking of Countries According to the Energy Sustainability Index

Countries

Ranking for 2013

Ranking for 2014

Change

Switzerland
Sweden
Norway
United Kingdom
United States
Qatar
Emirates
Bahrain
Saudi Arabia
Oman
Kuwait

1
3
7
5
15
18
44
38
51
62
66

1
2
3
4
12
20
35
47
68
72
76

0
1
4
1
3
-2
9
-9
-17
-10
-10

Source: World Energy Council, sustainable energy index 2014.

SAUDI ECONOMIC REPORT 2014 , (SECOR)

86

FOURTH: Doing Business Index


The Kingdom's ranking declined by five ranks in 2015 to occupy the 49th rank
at the international level among 189 countries covered by the report compared
with 44th in 2014 according the business doing report issued by the
International Finance Corporation affiliating the World Bank Group. The report
The Kingdom ranked the 49th

covers evaluation of the competitiveness of investment environment and

according to the Doing Business

performance of each economy compared with other economies. The existence

Index in 2015.

of a flexible and sound business environment represents the engine of


economic growth. Therefore, decision makers exert utmost efforts to
formulate policies that encourage business entrepreneurship in domestic
markets in addition to attraction of investments, a matter which contributes in
supporting economic diversification and innovation rates.

Table )31( : Kingdom's Ranking in sub-indices of Doing Business Index


Doing Business

Doing Business

2014

2015

Starting a Business

98

109

-11

Dealing with Construction Permits

21

21

Getting Electricity

23

22

Registering Property

19

20

-1

Getting Credit

67

71

-4

Protecting Minority Investors

61

62

-1

Paying Taxes

Trading Across Borders

84

92

-8

Enforcing Contracts

108

108

Resolving Insolvency

163

163

Sub-indices

Source: World Bank, Doing Business Report 2015.

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87

Change

According to the report, starting any project in the Kingdom encompasses nine
procedures and takes 20.5 working days in addition to a cost that reaches 4%
of per capita income. Therefore, the Kingdom's ranking in terms of easy start of
The Kingdom ranked 3rd
internationally

regarding

payment of taxes during 2015.

project stands at 109th out of 189 countries compared with 98th in the previous
year. Furthermore, the Kingdom's ranking declined in the border trade index
by eight ranks due to the disturbances on the northern and southern borders.
In terms of positive aspects, the Kingdom ranked 3rd internationally regarding
payment of taxes as well as its classification within the best tax systems
regarding stimulation of investments.

Figure )34( : Ranking of Countries According to Doing Business Index (2015)

Source: Prepared by SECOR, based on World Bank data, Doing Business report 2015.

SAUDI ECONOMIC REPORT 2014 , (SECOR)

88

FIFTH: Future Perspectives of Sovereign


The International Standard and Poors Agency for credit rating for 2014 reduced the
The future perspective of
Kingdom's sovereign rating
declined from positive to
stable.

future perspective of Kingdom's sovereign rating from positive to stable at a credit


degree of (AA). This means that the Kingdom's economy will continue with
achievement of the same robust performance in the future due to the large
reserves it formed over the past years. However, the Saudi economy still needs
more diversification of its revenues for protection against any fluctuations in oil
prices in future.

SIXTH: Knowledge Economy Index


The Kingdom ranked 50th internationally out of 145 countries according to the
knowledge economy index for 2012 issued by the World Bank. This index is based
The Kingdom ranked 50th
internationally according to

on four criteria including: economic incentives, education, innovation and CIT.


This index ranks countries according to their ability to generate and transform

the knowledge economy index

knowledge into scientific creativity and commercial innovations which ensure the

for 2012.

country's leadership in the various fields in addition to the provision of job


opportunities to national cadres. The Kingdom devotes utmost attention to the
move toward knowledge-based economy to support and upgrade sustainability of
economic growth indicators.
Figure )35( : Ranking of Countries According to Knowledge Economy Index for 2012

Source: Prepared by SECOR, based on World Bank data, knowledge-based economy Report 2012.
SAUDI ECONOMIC REPORT 2014 , (SECOR)

89

SEVENTH: Global Innovation Index


During 2014, the Kingdom realized a tangible progress in the global
innovation index issued by Cornell University, INSEAD University and the
World Intellectual Property Organization. The Kingdom ranked 38th out of
143 countries. It advanced by four ranks compared with its ranking in 2013.
This reflects the priority the Kingdom devotes to the transition to knowledge
The Kingdom ranked 38th
according

to

the

global

innovation index .It advanced by


four ranks in 2014.

economy as well as its understanding of the important role of innovation as an


engine of economic growth and prosperity, particularly in light of the plans
related with development of non-oil sectors aimed at ensuring economic
diversification, enhancement of competitiveness and integration in the world
economy.
This index ranks countries according to their innovative capacities and the
realized outcomes. The global innovation index is computed by defining an
average of two sub-indices which are: (1) the sub-index of innovation inputs
which is based on five pillars: institutions, human capital, research,
infrastructure and development of markets and business, and (2) sub-index of
innovation outputs comprising outputs of knowledge, technology and
innovation.
The positive aspect of this report is that the Kingdom ranked third
internationally in the index of ease of payment of taxes emanating from the
institutions index and ranked 5th internationally in non-material innovation
outputs index.

SAUDI ECONOMIC REPORT 2014 , (SECOR)

91

Despite the progress made by the Kingdom in the overall innovation index, it
still needs to improve its positions in some sub-indices such as: Press freedom
index emanating from the institutions index and the index of the ratio of
exports of CTI services to total trade emanating from the index of knowledge
and technology outputs where the Kingdom ranked 135th and 132nd
respectively.

Table )31( : Kingdom's Ranking According to Global Innovation Index

Countries

Ranking for

Ranking for

2013

2014

1
3
2
5
38
42
43
67
50
80

1
2
3
6
36
38
47
62
69
75

Switzerland
United Kingdom
Sweden
United States
Emirates
Saudi Arabia
Qatar
Bahrain
Kuwait
Oman

Change

0
1
-1
-1
2
4
-4
5
-19
5

Source: Cornell University , (INSEAD) University and the World Intellectual Property Organization (wipo), Global
Innovation Index 2014 report.

SAUDI ECONOMIC REPORT 2014 , (SECOR)

91

EIGHTH: E-Government Transaction Index


The Kingdom realized a tangible progress in the e-government transactions
index which is prepared every two years to monitor and evaluate government
procedures. The Kingdom ranked 36th out of 193 countries covered by the UN
report on e-government transactions for 2014 compared to 41th and 58th in
e-

2012 and 2010 respectively.


This progress reflects the efforts exerted regarding the move towards a

government transactions index in

knowledge and information based society and making use of technology in the

2014.

provision of government services. It also reflects the significant expenditure


allocated for development of communication infrastructure, particularly e-

The Kingdom ranked 36th


internationally

in

the

government portals. The report commended the national e-government


transactions portal (Saudi) which ensures access to e-government services in
the Kingdom and completion of transactions rapidly and efficiently.
Table )32( : Kingdom's Ranking According to E-Government Transactions Index

Ranking for

Ranking for

2012

2014

Republic of Korea

Australia

12

10

Singapore

10

United States

-2

United Kingdom

-4

Bahrain

36

18

18

Emirates

28

32

-4

Saudi Arabia

41

36

Qatar

48

44

Oman

64

48

16

Kuwait

63

49

14

Countries

Source: United Nations, the United Nations report for E-Government in 2014

SAUDI ECONOMIC REPORT 2014 , (SECOR)

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Change

The e-government index depends on three key indicators which comprise a


number of sub-indicators as shown below :
E-Government Services Delivery Indicator (OSI) which assesses the level of
The Kingdom ranked 18th

services and information available on government web sites. It comprises four

according to the E-government


services delivery indicator, 71st

sub-indicators: Emerging Information Services, Advanced Information Services,


Transactions Services, Related Services.

according to human resources

Human Resources Indicator (HCI) which reflects the extent of ability of the

indicator and 52nd according to

people of a country to use ICT. It comprises four sub-indicators: Education

TII indicator.

among those in the age of 15 years and above (adults), Gross Enrollment Rate,
Expected Years in Education, Average years of schooling.
Telecommunications Infrastructure Indicator (TII) which assesses ICT
infrastructure. It comprises five sub-indicators: Individuals using internet,
Mobile phone users, Fixed telephone users, Broadband subscribers (wireless),
Broadband subscribers (wire/fixed).
The Kingdom ranked the 18th according to the E-government services delivery
indicator, which represents one of the key indicators which compose the overall
index, compared to 19th in 2012. It also ranked the 71st according to human
resources indicator and 52nd according to TII indicator.
Table ( 33( : Overall Assessment of EGDI (2014)
E-Government

Online Service

Human Capital

Telecommunication

Development Index

Index

Index

Infrastructure Index

Britain
Bahrain
Emirates
Saudi Arabia
Qatar

1
2
3
4
5
6
7
8
18
32
36
44

0.9462
0.9103
0.9076
0.8938
0.8897
0.8874
0.8748
0.8695
0.8089
0.7136
0.6900
0.6362

0.9764
0.9291
0.9921
1.00
0.9291
0.9449
0.9449
0.8976
0.9370
0.8819
0.7717
0.6535

0.9273
0.9978
0.8515
0.8812
0.9224
0.8621
0.9390
0.8574
0.7840
0.6657
0.7461
0.6671

0.9350
0.8041
0.8793
0.8003
0.8175
0.8553
0.7406
0.8534
0.7055
0.5932
0.5523
0.5879

Oman

48

0.6273

0.7323

0.6624

0.4873

Kuwait

49

0.6268

0.5748

0.7194

0.5862

Countries

Ranking

South Korea
Australia
Singapore
France
Netherlands
Japan
United States

Scale ranges between zero and one, where zero is the worst performance measure, and the one is the best level of performance.
Source: United Nations, the United Nations Report for E-Government in 2014

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Shaded text No. 3: Components of Global Competitiveness Index


1.

Basic Requirements:

Institutions: Reflects the institutional structure in which individuals, firms and government agencies work and is considered as a key tool
for development. It comprises 21 sub-indicators including: waste in government spending, property rights, confidence in politicians,
effectiveness of legal frame in settlement of disputes, effectiveness of corporate boards of directors, judiciary independence.
Infrastructure: It measures available infrastructure which provide easy linkage and balanced development among all provinces. It
comprises 9 sub-indicators, including quality of infrastructure, roads, railways, seaports, air transport, number of subscribers in mobile
phone and fixed telephone, and quality of sources of electricity power .
Macro Economy Structure: It reflects the extent of stability of macro economy and its role in achieving a sustainable growth and enhancing
the development process. It comprises 5 sub-indicators, including: Public Debt as a percent of GDP, Rate of inflation, National Saving as a
percent of GDP, State budget as a percent of GDP, Creditworthiness of the Country.
Health and Primary Education: It reflects the degree of investment in primary education and health services. It comprises 10 subindicators: Quality and Rate of Enrollment of Elementary Education, Life Expectancy at Birth, Infant Mortality Rate at Birth, Incidence of
AIDS and TB Prevalence, Impacts of AIDS, TB and Malaria on Business.

2.

Efficiency Enablers:

Higher Education and Training: It measures the quality of higher education and training and their role in enhancing the competitiveness
of the economy to be capable of entering into the fields of creative production and R&D. It is composed of 8 sub-indicators, including:
Quality of the Education System, Quality of Mathematics and Science Education, Availability of Research and Training Services, Gross
Rate of Enrollment in Tertiary and Secondary Education, Quality of Schools and Colleges Management .
Efficiency of Merchandise Market: It measures ability of the economy to export highly-demanded, highly-specialized goods. It comprises
16 sub-indicators: Severity of Domestic Competition, Degree of Market Control, Efficiency of Monopoly Combating, Taxes as a Percent of
Profits, Imports as a Percent of GDP.
Efficiency of Labor Market: It measures the efficiency and flexibility of labor market. It comprises 10 sub-indicators: Flexibility in
Determining Wages, Level of Wages and Productivity, Ability of the Country to Attract and Retain Talents, Rate of Female Participation in
Labor force compared to the Rate of Males, Type of Relationship between the Employee and the Employer, Degree of Strictness of Labor
Laws.
Development of Capital Market: it reflects the ability of the financial sector to encourage investment and provide financial services. It
comprises of sub-indicators, including: Ease of Obtaining Loans, Availability of Investment Capital, Safety of Banks, Availability of
Financial Services, and Strength of Legal Rights.
Technological Readiness: It measures the degree of benefits obtained by countries from national and international technological
developments. It comprises 7 sub-indicators, including: Direct Foreign Investment, Technology Transfer, Availability of Advanced
Technology, Subscribers of Mobile Internet, Degree of Technical Assimilation by Corporate Sector.
Market Size: It depends on 4 sub-indicators: Internal Market Size, External Market Size, GDP (based on PPP), Exports as a Percent of GDP.

3. Factors of Innovation and Development:


Development of Business Environment: It comprises appropriateness of business environment, doing business, corporate strategies,
which play a role in stimulating advanced production. It is composed of 9 sub-indicators, including: Development of Production Processes,
Nature of the Comparative Advantage, Number and Type of Domestic Suppliers, Corporate Marketing Staff.
Innovation: to achieve a knowledge economy and a sustainable productivity, it is necessary to depend on innovation. It comprises 7 subindicators, including: the Extent of Availability of Scientists and Engineers, Ability to Innovate, Quality of Scientific Research Institutions,
Corporate Spending on R&D, Number of Patents.

SAUDI ECONOMIC REPORT 2014 , (SECOR)

94

8
WORLD ECONOMY

SAUDI ECONOMIC REPORT 2014 , (SECOR)

95

8. World Economy
FIRST: Gross Domestic Product
The growth rate of the world
economy declined slightly in
2014 to reach 3.39%.

The rate of growth of the world economy declined slightly in 2014 compared to
2013. The global real GDP grew by 3.39% in 2014 compared to 3.41 in 2013. This
decline may be attributed to many key factors. First: the sharp decrease of world
oil prices caused weak growth in some oil-exporting countries such as Venezuela
which recorded a growth rate of -4% in 2014 compared to 1.3% in 2013. Second:
marked decrease of real GDP in Japan in 2014 which recorded a growth rate of
-0.06% compared to 1.6% in 2013. Third: slow down of growth rate in the
emerging market economies and the developing countries of Asia to 7.36% in
2014 compared to 7.75% in 2013, reflecting the weak growth in some major
countries which are listed within the emerging market economies of Asia, such as
China which recorded a growth rate of 7.36% in 2014 compared to 7.75% in 2013.
In contrast, the growth rate of the advanced economies improved by 1.8% in 2014
compared to 1.4% in 2013. The Euro Zone, which comprises 18 European
countries, witnessed a remarkable recovery of growth amounted to 0.88% in 2014
compared to -0.46% in 2013.
Table )34( : Real growth rates of GDP

Countries
World
Advanced economies
Major advanced economies (G7)
United States
United Kingdom
Germany
France
Italy
Japan
Canada
Euro-zone
European Union
Emerging market and developing countries
Middle East and North Africa
Saudi Arabia
Kuwait
Qatar
Oman
Bahrain
United Arab Emirates

2013
3.41
1.36
1.48
2.22
1.67
0.21
0.28
-1.69
1.61
2.00
-0.46
0.12
5.00
2.26
2.67
1.48
6.32
4.69
5.32
5.2

2014
3.39
1.81
1.67
2.39
2.56
1.6
0.36
-0.42
-0.06
2.53
0.88
1.39
4.6
2.44
3.47
1.29
6.14
2.95
4.75
3.6

*Forecasts of world GDP growth rates in different economies for the year 2015 issued by the World Economic Outlook
Source: IMF, World Economic Outlook, April, 2015.

SAUDI ECONOMIC REPORT 2014 , (SECOR)

96

2015*
3.45
2.36
2.31
3.14
2.72
1.62
1.16
0.49
1.04
2.16
1.45
1.85
4.26
2.75
2.97
1.73
7.13
4.62
2.67
3.15

Figure )36( : GDP Growth Rate in Global Economies (1995-2015)

Source: Prepared by SECOR, based on IMF data, World Economic Outlook, April 2015.

SAUDI ECONOMIC REPORT 2014 , (SECOR)

97

SECOND: Inflation
At the global level, rates of inflation continued to decline reaching 3.5% in 2014
At the global level, rates of
inflation declined to 3.5% in
2014.

compared to 3.9% in 2013. Rates of inflation decreased in many groups of


countries. In the advanced economies, the rate of inflation amounted to 1.36%
in 2014 compared to 1.37% in 2013. The emerging market economies and
developing counties recorded an inflation rate of 5.1% in 2014 compared to
5.9% in 2013; the Euro Zone 0.43% compared to 1.3%; and the MENA region
6.5% in 2014 compared to 9.3% in 2013(table 35).
Table )35( : Inflation Rate (%)
Countries

2013

2014

2015*

World

3.9

3.5

3.2

Advanced economies

1.37

1.36

0.35

Major advanced economies (G7)

1.3

1.5

0.27

United States

1.5

1.6

0.1

United Kingdom

2.6

1.5

0.13

Germany

1.6

0.79

0.21

France

0.99

0.62

0.11

Italy

1.28

0.22

0.002

Japan

0.36

2.74

1.01

Canada

0.95

1.9

0.86

Euro-zone

1.3

0.43

0.06

European Union

1.5

0.53

0.03

Emerging market and developing countries

5.9

5.1

5.4

Middle East and North Africa

9.3

6.5

6.2

Saudi Arabia

3.51

2.69

1.99

Kuwait

2.7

2.94

3.34

Qatar

3.06

3.04

1.78

Oman

1.24

1.01

0.97

Bahrain

3.31

2.49

2.12

United Arab Emirates

1.1

2.35

2.11

*Forecasts of world Inflation growth rates in different economies for the year 2015 issued by the World Economic Outlook
Source: IMF, World Economic Outlook, April, 2015.
SAUDI ECONOMIC REPORT 2014 , (SECOR)

98

Figure )37( : Global Inflation Rates )2115-1995(

Source: Prepared by SECOR, based on IMF data World Economic Outlook April 2015.

SAUDI ECONOMIC REPORT 2014 , (SECOR)

99

THIRD: Unemployment
Most of the world economies witnessed decrease of unemployment rates
during 2014. The rate of unemployment in the advanced economies decreased

Most of the world economies


witnessed

decrease

to 7.3% in 2014 compared to 7.9% in 2013. In the Euro Zone, it declined from

of

11.9% in 2013 to 11.6% in 2014. At the level of G7, rates of unemployment

unemployment rates during

decreased in all member countries except for Italy in where the rate of

2014.

unemployment increased from 12.2% in 2013 to 12.8% in 2014 (table 36).

Table )36( : Rates of Unemployment (As a Percent of Labor force)


Countries

2013

2014

2015*

Advanced economies

7.9

7.3

6.9

Major advanced economies (G7)

7.1

6.4

United States

7.4

6.2

5.5

United Kingdom

7.6

6.2

5.4

Germany

5.2

4.9

4.8

France

10.3

10.2

10.1

Italy

12.2

12.8

12.6

Japan

3.6

3.7

Canada

7.1

6.9

6.9

Euro-zone

11.9

11.6

11.1

Saudi Arabia

5.6

5.7

Kuwait

2.07

2.07

2.07

Bahrain

4.3

4.1

4.3

*Forecasts of world Unemployment growth rates in different economies for the year 2015 issued by the World Economic Outlook
Source: IMF, World Economic Outlook, April, 2015.

SAUDI ECONOMIC REPORT 2014 , (SECOR)

111

FOURTH: International Trade


The growth rate of the World exports declined from 3.7% in 2013 to 3.3%

in 2014. In contrast, the rate of growth of world imports increased from 3.3% in
2013 to 3.4% in 2014. As a result, the size of the international trade witnessed
a slight decrease in terms of growth rate in 2014 when it grew by 3.4%
The size of the international

compared to 3.5% in 2013. However, it is expected to grow by 3.7% in 2015.

trade

slight

At the level of advanced economies and the Euro Zone, exports of goods and

decrease in terms of growth rate

services grew by 3.3% and 4.2% respectively in 2014 compared to 3.1% and

in 2014 when it grew by 3.4%

2.1% respectively in 2013. In contrast, the growth rate of exports of goods and

witnessed

compared to 3.5% in 2013.

services in the emerging economies and developing countries and MENA


economies, declined to 3.4% and 0.5% respectively in 2014 compared to 4.6%
and 2.9% respectively in 2013.
With respect to imports of goods and services, the advanced economies and the
Euro Zone economies witnessed growth rates of 3.3% and 4.3% respectively in
2014 compared to 2.1% and 1% respectively in 2013. On the other hand, the
growth rate in the emerging economies and the developing countries and in
MENA economies declined to 3.7% and 7% respectively in 2014 compared to
5.5% and 7.9% in 2013 (table 37).

4102

Table )37( : Growth Rates of International Trade (%)

%4.2

growth rate of world trade (goods and services )


. 4104 %4.3

Exports
Advanced economies
Euro-zone
Emerging markets and developing countries
Middle East and North African
Imports
Advanced economies
Euro-zone
Emerging markets and developing countries
Middle East and North African

2013
3.5

2014
3.4

2015*
3.7

3.1
2.1
4.6
2.9

3.3
4.2
3.4
0.5

3.2
4.4
5.3
5.4

2.1
1.0
5.5
7.9

3.3
4.3
3.7
7.0

3.3
4.3
3.5
4.6

*Forecasts of world trade growth rates in different economies for the year 2015 issued by the World Economic Outlook
Source:
IMF, World Economic Outlook, April, 2015.

4102

%4.2
ECONOMIC REPORT 2014 , (SECOR)
SAUDI
. 4104 %4.3

111

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