Abstract
This paper explores the potential spatial diversification of manufactured goods’ exports in Saudi Arabia. To account for the spatial interactions of Saudi’s manufactured goods’ exports, we use a pa...
Highlights
Saudi Arabia’s economy highly depends on oil exports
As for the joint GDP, the results reveal that exports of manufactured goods will be enlarged by 0.74% when the joint GDP in Saudi Arabia and its partners increases by 1%
This article is the first attempt to provide an empirical investigation of the importance of spatial diversification in boosting Saudi Arabia’s manufactured goods exports
Summary
Saudi Arabia’s economy highly depends on oil exports. The oil sector contributed nearly 87% of government revenue, 42% of GDP, and 90% of export earnings in 2016 (The World factbook, 2018). The economic predominance of the oil sector is revealing the low level of economic diversification in Saudi Arabia. Considering the durability of lower oil-prices, it has become imperative for the Saudi government to look at diversifying its domestic economy In this way, the International Monetary Fund [IMF] (2016) considers that economic diversification is an inevitable policy in oil-exporting Arab countries because it reduces the impact of the external shocks associated with oil markets on the economy. Sustainable growth will need the eventual reallocation of resources toward the high value-added manufacturing sector This policy leads to the creation of more jobs, extends government revenue, and protects the economy against external shocks (Mudenda et al, 2014; Sannassee et al, 2014). The manufacturing sector contributed 12% of GDP in 2016 compared to 3% in 1974.4 the increase of the share of manufacturing sector in both GDP and total exports, diversification towards manufacturing exports in Saudi Arabia can constitute the catalyst for economic growth in the post-oil era.
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