Analyzing the Impact of Vision 2030’s Economic Reforms on Saudi Arabia’s Consumer Price Index

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This study examines the relationship between CO2 emissions, labor force participation, foreign direct investment (FDI), and trade openness on the Consumer Price Index (CPI) in Saudi Arabia, within the context of Vision 2030’s economic reforms. Vision 2030 aims to diversify the economy, reduce oil dependency, and promote sustainable growth, making it crucial to understand the factors influencing inflation and economic stability. Using annual data from 2001 to 2022 and the nonlinear Autoregressive Distributed Lag (NARDL) bounds testing approach, the study analyzes both short- and long-term effects. The findings reveal that higher CO2 emissions have a deflationary effect, reducing the CPI in both the short and long term, while FDI shows an inflationary impact with a delayed effect. Labor force expansion contributes to lowering the CPI, reflecting its deflationary pressure, especially over the long term. Trade openness is also examined for its dual effects on CPI, In the short run, both positive and negative trade openness reduce consumer prices, while in the long run, positive trade openness increases inflation, and negative trade openness lowers prices. This shows the differing inflationary impacts of trade openness over time. These findings contribute to the policy discourse on balancing economic growth, environmental sustainability, and inflation management, offering strategic insights for policymakers in alignment with Saudi Arabia’s Vision 2030 objectives.