The answer is always yes, but it is conditional.
Several years ago, a consensus prevailed among economic circles, especially in the International Monetary Fund and the World Bank, that the “sacred” tendency is always to call for growth, which is often expressed through gross national income (GDP), as growth is sufficient to deal with all the usual economic challenges. Such as: unemployment, debt, and improved standard of living.
The comment came to mind when I saw the income growth figures for Saudi Arabia for the year 2023, which recorded a decline for the year estimated at 0.9% – that is, less than 1%, compared to a growth in 2022 of 8.7%. The source of the relatively sharp fluctuation was due to the decline in oil income due to the decline in prices and the lack of voluntary production in line with the “OPEC+” policy.
I will not go into the drawbacks of GDP as a benchmark, as this is a long empirical and research topic, so I will focus on the “conditional” in employing GDP numbers.
There is no doubt that economic growth is always important, but it is not enough to explain what is happening in the economy through one number for one year, especially when the economy is undergoing a significant transformation, as in the case of Saudi Arabia. The centrality of oil or any primary commodity in the economy makes growth numbers inevitably depend on income – quantity and price, as oil income decreased by about 9% last year.
In the case of the Kingdom, there is a clear trend to reduce dependence on oil income, and therefore perhaps the most important figure in these growth trends concerns total non-oil income.
For the same year, this portion of income recorded about 5% higher than most of the G20 countries. This comparison, in my view, is important, because most of the countries in the group do not depend on commodities as much as the Kingdom relies on oil. But there are fundamental aspects of the issue that make GDP less important for developing countries. The less diversity and economic depth, the less important the number is, because the total number is logical and mimics the average, and the average is a number that is often not useful in monitoring important partial changes during the process of economic transformations. For example, if the industrial sector or any other sector achieves an impressive rate of growth and development, but its size in the economy is small, it will not have much impact.
For years, the shortcomings of GDP have been known even to the broadest and most economically deep countries.
We do not live alone, so we must pay attention to traditional indicators. But there is a need for special indicators to track and monitor trends and developments in the Saudi economy.
Some are interested in what international institutions mention and the hierarchy of some sub-categories that come from some international bodies, as if they are an alternative to special measurements of the national economy.
There is a need for new indicators that focus on various aspects that deal with money, because the financial nature of the Saudi economy is still important and will continue. There are also aspects related to added value, and other human aspects.
For example, in money, I find that remittances from expatriates are a necessary indicator and measure the fiscal deficit or surplus as a percentage of non-oil income, as well as investment in industry and export and its relationship with borrowing.
In human aspects, I find that the role of the citizen in technical aspects – especially for non-university graduates and their salaries – is an important indicator, and I also find that reducing university students and focusing on quality and global competition is a crucial criterion.
These are some indicators and others that need research and development in order to understand the joints and parts of the value-added chain that the loose gross national income numbers do not deal with.
This news article has been translated from the original language to English by WorldsNewsNow.com.
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