Saudi Arabia Economy

Saudi Arabia Economy


  • Basic data
  • Public finances and the state budget
  • Banking system
  • Tax system

Basic data

As a result of the COVID-19 pandemic, but especially low oil prices, VAT fell by 4.1% year-on-year in 2020, but in 2021 the trend reversed and GDP grew by an average of 3.2%. The forecast for the next few years is favorable due to high oil prices. During 2020, there was also an increase in indebtedness, but the government did not abandon the program of fiscal responsibility, and the favorable oil prices on the world markets add to the considerations of reducing the indebtedness to a very low value in the coming years.

According to, unemployment stands at 11%, with men at 5.2% and women at 22.5%. However, this is only about the statistics of Saudi citizens. The year-on-year drop in unemployment among Saudi women by 6% is interesting, which demonstrates the high emphasis the government places on activating the hitherto untapped potential of this part of the workforce. Saudi workforce participation is 51.5%. About 10.5 million foreigners live in the country out of a total population of 35 million. These represent a significant financial outflow from the country (4billion USD in 2021). Inflation is relatively stable and, according to the Saudi Statistical Office, hovers around 2.3%. The consumer price index increased by 1.1% year-on-year.

The Saudi economy has historically been built on oil production. By sector, the oil sector accounts for 25.2% of GDP (2021: 19.6%). The jump was due to the rise in oil prices. Government services account for 18.6% of GDP. The private sector contributes 51.7% to GDP. In the private sector, wholesale and retail (9.2%) and manufacturing (8.8%) contributed the most to GDP. It should be noted here that the figures on the share of the oil sector do not include all activities; In real terms, oil and natural gas make up over 40% of GDP, 80% of state treasury income and 90% of export income.

From the point of view of the composition of the industry, in addition to oil extraction, the chemical industry is also key. In its priorities, the government emphasizes the development of the mining industry, where there is a high untapped potential of local mineral wealth (gold, copper, precious metals). The government also attaches great importance to tourism, which is developing almost from nothing (the country has only been issuing tourist visas since 2019). For comparison: GDP per inhabitant converted to purchasing power parity is USD 46,346 in SA and USD 44,920 in the Czech Republic according to OECD data.

Table from MOP + additionally balance of payments, indebtedness/GDP.

Pointer 2019 2020 2021 2022 2023
GDP growth (%) 0.3 -4.1 2.9 5 3.3
GDP/population (USD/PPP) 49,021.00 47,101.60 48,870.00 52,250.00 54,080.0
Inflation (%) -2.1 3.4 3.1 1.8 1.4
Unemployment (%) 12 12.6 11 10.8 10.7
Export of goods (billion USD) 261.6 160.2 250.5 294.7 290.6
Import of goods (billion USD) 153.8 123.3 156.1 180.6 191.8
Trade Balance (Billion USD) 121.3 47.9 108.4 130.3 116
Industrial production (% change) -2.6 -4.3 2 5.7 3.2
Current account balance of payments (billion USD) 38.2 -22.8 56.1
Debt / GDP (%) 22.8 32.5 35.7 31.3(p) 30.44(p)
Population (millions) 34.2 35 35.8 36.7 37.5
Competitiveness 26/63 24/63 32/64 ON ON
OECD export risk 2/7 2/7 2/7 ON ON

Source: EIU, OECD, IMD, National Debt Management Centre, Saudi Central Bank

Public finance and state budget

Public finance 2022
State budget balance (% of GDP) 2.5
Public debt (% of GDP) 35.7
Current account balance (billion USD) 56.1
Taxes 2022
F.O 0%
VAT 15%

State budget expenditures for 2022 are planned at SAR 955 billion (CZK trillion), which represents a year-on-year decrease of 5.6%. State budget revenues are forecast at 1.05 billion. SAR (6 billion CZK). This is the first Saudi surplus budget since 2013. The surplus of SAR 90 billion (CZK 53billion) will be used partly to strengthen government reserves and partly for development funds to accelerate the implementation of government megaprojects.

Favorable prices on the oil market allowed the Saudi government to gain room for financing and further implementation of economic diversification plans. The structural reforms taking place as part of the Vision 2030 plan are rather gradual in nature and will not manifest themselves only in the horizon of one or two years. National debt rose from $227 billion to $250 billion in 2021. This is the lowest rate of debt growth in the last five years. Foreign debt rose from USD 9 billion to USD 10billion. Budget expenditures rose from 4.5% of GDP to 12% of GDP.

Foreign exchange reserves, which in 2020 fell by about 10% year-on-year to USD 440 billion, rose slightly to USD 450 billion in 2021 due to the recovery of oil prices.

Banking system

How does the banking system fare, closedness/openness of the system, regulation, development of interest rates, the strongest top 5 banks (domestic + possibly foreign) + a comment on each of them, information on letters of credit, any specifics (e.g. Islamic banks)

The Saudi banking sector is stable, mainly due to the relatively high capitalization of local commercial banks. The banking system is managed by the Saudi Central Bank, formerly the Saudi Arabian Monetary Agency ( SAMA ). Saudi banks were boosted in 2020 with two financial injections totaling $2billion to stabilize the banking sector in anticipation of loan defaults related to the COVID-19 pandemic.

Since the second half of 2009, the establishment of branches of foreign banks in their 100% ownership has been allowed (Swiss UBS was one of the first to use this option). It was joined by a number of international banks that have branches in SAK, but do not operate any retail services for which they do not have a license (e.g. State Bank of India, BNP Paribas, JP Morgan Chase, Deutsche Banka, Gulf International Bank, etc.).

Largest commercial banks:

  1. Saudi National Bank (SNB)
  2. Al Rajhi Bank
  3. Riyad Bank
  4. Saudi British Bank (SABB)
  5. Banque Saudi Fransi

In 2020, it was decided to merge, or rather take over the then 4th largest bank, Samba Bank, by NCB, creating the strongest bank in the country and in the region, Saudi National Bank, with assets of. The takeover process has still not been completed to date and brings challenges especially to retail clients. In general, clients of banks with foreign participation have a more positive experience with their bank’s approach. The banking sector in the country is quite specific, especially in terms of service quality and client information. It is possible to encounter a sudden blocking of the account due to the need to supply additional documentation, which the client was not informed about in advance. Also when setting up an account, you may encounter different information about the necessary documentation, and subsequently delays in these basic actions.

The government of Saudi Arabia also introduced a number of measures in April 2022 limiting the creation of accounts online, or the need to manually copy one-time control codes for transactions, as a result of increasing fraud attempts.

So-called specialized credit institutions were established by the state for some banking services. They are:

  • Saudi Credit Bank: personal loans
  • Saudi Arabian Agricultural Bank: agricultural loans
  • Saudi Industrial Development Fund: concessional industrial loans
  • Real Estate Development Fund: construction loans
  • Public Investment Fund: preferential lending for large projects
  • Saudi Fund for Development: preferential export financing

There are dozens of insurance companies operating in the country, but the insurance market is dominated by the state-owned National Company for Cooperative Insurance, whose services are based on the Islamic principle of mutual non-profit insurance. The main commercial insurance companies include, among others, AXA/Norwich Union, European Saudi Co. for Cooperative Insurance or Royal Sun Insurance Co.

Tax system

The Saudi tax system is relatively clear and not subject to many changes. Personal income tax has not been introduced and is not even being considered. The income of non-residents is subject to a withholding tax of 5% (author’s fees 15%). Corporate income tax wholly owned by non-GCC entities is set at 20%. For others (Saudi owners and owners from GCC countries) only religious zakat tax of 5%.

In the case of a joint venture, the amount of profit tax is adjusted according to the share of the individual partners and their country of origin (GCC x non-GCC). Income arising from activities in the territory of the KSA is taxed. If the company operates in the natural gas sector, the income tax rate is 30%. In the oil sector, the rate can reach up to 85% (the rate progressively decreases to 50% if the amount of investment exceeds USD 100 billion). VAT, introduced in 2018, was increased from 5% to 15% in 2021 to compensate for the shortfall in state oil revenues in 2020. Depending on economic developments, it is expected to be gradually reduced.

Simple imports of goods are not subject to income taxation, however, if the contract for the import of goods includes an accompanying activity on the territory of the KSA, then this activity is taxed (e.g. installation of equipment). If it is not possible to recognize the value of this activity from the contract, its amount is set at an estimated 10% of the delivery of goods.

From July 2017, a fee was introduced for each dependent of a foreigner permanently residing in Saudi Arabia. In 2022, this fee is 400 SAR / month, while it is possible to obtain a residence permit for 3, 6, 9 or 12 months.

Excise duty on tobacco (and tobacco products) and energy soft drinks is set at 100% and on non-alcoholic carbonated sweetened drinks at 50%, in all cases of the retail selling price.

Saudi Arabia Economy