Is Saudi's Bold Vision Taking Shape?

Heralding major reforms, Saudi Arabia’s Vision 2030 programme was launched with much gusto last year. Has there been significant progress or do key challenges still persist?

- Aarti Nagraj

Saudi Arabia has dominated regional and international headlines several times this year. United States President Donald Trump’s controversial visit to the kingdom in May, and the sudden and surprising change in the country’s Crown Prince in June, have been among the stories that have turned the world’s eyes towards the Gulf region of late.

There has also been plenty of news on the economic front, with the kingdom registering its first drop in gross domestic product (GDP) since the financial crisis during the first quarter of 2017 — mainly because of a contraction in its oil sector. Saudi's GDP — adjusted for inflation — fell 0.5 per cent year-on-year in Q1, with the oil sector shrinking 2.3 per cent.

Staying on the oil theme, the Kingdom has also been arguably the key driving force behind an international deal to cut crude output in a bid to balance the market’s supply and demand dynamics and prop up the stagnating oil price.

Under the deal, several members of the Organisation of the Petroleum Exporting Countries (OPEC) and other major oil producers such as Russia initially agreed to reduce output by 1.8 million barrels per day for six months starting on January 1, and later extended it to 2018.

While the move did boost oil prices at the start of the year, other factors such as rising shale supply from the US and slowing demand have dragged on prices, which have since declined.

However, Saudi officials have stressed that they are not worried. Energy minister Khalid al-Falih said in June that the oil market was ‘heading in the right direction’.

From a non-oil perspective, the kingdom’s economy has fared much better, with the non-oil public sector shrinking only 0.1 per cent and the non-oil private sector actually growing by 0.9 per cent in Q1. This private sector growth was the fastest since the fourth quarter of 2015.