Oil Overdependence and Dutch Disease, KSA Evidence

Abstract

In the context of recent oil prices fall and resulting budgetary problems faced by KSA, it is very interesting to examine the country's overdependence on oil revenues. In this paper, we examine whether extreme oil dependence for Saudi Arabia is the symptom of Dutch Disease. We first provide a brief review of the literature on Dutch Disease and the natural resource curse. We then discuss the symptoms of Dutch Disease, which are discussed in the literature, with special reference to KSA. We presume that, while KSA has all of the symptoms, the diagnosis of Dutch Disease remains to be confirmed. However, recently the policymakers are taking new initiative like Vision 2030 which will open the doors for diversification to non-oil based economy. Under the Vision 2030, the Saudi government is providing the incentive to the private sector for the establishment of a well-diversified manufacturing sector and value-added supply chain. It appears to be a timely and right directional effort.