The Macro Economy: Performance, Structure and Problems

Abstract

The Kingdom’s Fourth Development Plan was published in 1985, heralding the start of the fourth five-year period of development planning. The economy is in a state of transition. This adjustment has been forced upon the Kingdom through the volatility of international oil markets; it is also the natural consequence of having achieved the virtual completion of infrastructural development. Thus the Fourth Plan highlights the need for a longer-term strategy of structural change and diversification. Unlike most other developing nations, and as a result of the oil price rises from 1973 to 1980, there was no shortage of finance to promote economic activity in the early years of the planning period. The Kingdom ran large government budget surpluses until 1983–4. Since 1982 the Government has found it necessary to readjust its spending plans to allow for the marked decline in oil prices and general volatility of world oil markets. However, finance alone is not sufficient to guarantee progress and problems have been encountered in converting financial resources into productive, physical ones. There have been particular problems associated with inflation in the mid-1970s and manpower shortages throughout the period.