The percentage of fuel exports of the country’s total merchandises has declined from 89 percent in 1999 to 79 percent in 2016. Despite this decrease, oil is still Saudi Arabia’s major export, thus qualifying it for the Dutch disease. The proportion of fuel exports was steadily at the same level from 199 to 2013. This proportion experienced a significant drop in 2015. Over the course of 2014, there was global oil glut. This resulted in a major drop in the global oil prices, from $100 per barrel to less than $60 per barrel (Lawler et al., 2014). The lower price per unit accounts for the drop in the proportion of exports. The low percentage of food exports reaffirms the over-reliance of the country on the oil industry. These exports form less than 2 percent of the total exports. Despite the drop in oil value, the food exports proportion nearly doubled to 2 percent, which is still a low figure. The value of agricultural raw materials also stagnated at nearly the same value. Despite the troubles plaguing the global oil market, the country was hardly motivated to divest to other sectors of the economy more so agriculture. This further underlines the overdependence of the country on a single economic sector and the compromised adaptability of its citizen to any other business ventures.
From 2009, Saudi Arabia had seen significant growth in its GDP. In fact, in 2011, its GDP had grown by a remarkable 10 percent. Between 2009 and 2011, the oil prices had nearly doubled. This accounts for the growth in GDP during the time. The high oil prices ensured the influx of large amounts of foreign income into the country. This was cemented by Saudi Arabia’s position as one of the major oil producers in the world. 2010 was an especially remarkable year but had adverse effects on other segments of the economy especially agriculture. Employment in the agricultural sector was at an all-time low during this time. The high value of oil exports resulted in the neglect of other sectors by the government. The value-added tax from local agricultural products’ proportion was halved over the years of consequence. This implies that there was a reduction in the country’s agricultural outputs. This is a major symptom of the Dutch disease (Brincikova, 2016). The easier extraction of oil and the country’s environmental status ensured that agriculture received minimal attention.
The overdependence on the oil sector can be further explained by its employment numbers. In the years of study, the percentage of employment had marginally increased. This shows that the Saudi government had hardly implemented any remedies to bolster other sectors of the economy. The value-added tax paid by industries had reduced. Reduced collection of Value-Added Tax implies reduced industrial production. This deficit was inevitably covered by the importation of foreign goods as the Saudis paid more attention to the production of oil. Another sector that grew over the period was the service industry. This was shown by the increased collection of VAT in this sector. The growth of the service sector is usually associated with adverse effects of the general economy (Dutt & Lee, 1993). Growth in the service sector implies that more people are spending rather than making investments, i.e., being consumers rather than producers. This will lead to an increased number of imports into the country, disadvantaging fledgling sectors of the economy.
Finally, the total natural resources rents and oil rents stress the need to develop other sectors. Th value of these resources is steadily reducing due to the emphasis of the country on the extraction of oil. The mineral rents have increased over the period, thus showing the failure of exploitation of the sector. With the dwindling resources in mind, the Dutch disease is confirmed and necessitates an appropriate government response.
- Brincikova, Z. (2016). The Dutch Disease: An Overview. European Scientific Journal, 94-100. Retrieved from https://eujournal.org/index.php/esj/article/view/7821
- Dutt, A. K., & Lee, K. Y. (1993). The service sector and economic growth: some cross-section evidence. International Review of Applied Economics, 7(3), 311-329.
- Lawler, Alex, Sheppard, D., & El Gamal, R. (2014, November 28). Saudis block OPEC output cut, sending oil price plunging. Retrieved from https://www.reuters.com/article/us-opec-meeting/saudis-block-opec-output-cut-sending-oil-price-plunging-idUSKCN0JA0O320141128