The Economy of Saudi Arabia:Troubled Present, Grim Future
Aug 31, 1994
The kingdom of Saudi Arabia faces a grim economic future. Contrary to predictions in the late 1970s and early 1980s of rising prices for Middle Eastern oil, world oil demands and prices have followed a downward trend since 1981, resulting in a reduction in Saudi oil revenues. Since 1983 Saudi Arabia has stopped accumulating financial surpluses, forcing it to draw down its financial reserves and since, 1987, to resort to large-scale borrowing.
In this Policy Paper, Eliyahu Kanovsky examines Saudi economic policy and performance over three decades and offers a grim assessment about the economic viability of one of America's key regional allies. Kanovsky argues that excessive spending polices, encouraged in part by incorrect oil price forecasts, large deficits, and Riyadh's inability to implement necessary reductions in expenditures has trapped the regime into high-spending patterns that it can no longer afford.