ihab itani-macroeconomics-assignment 3
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Ihab Itani
Macroeconomics
2/26/2014
Saudi Arabia Income Analysis
Saudi Arabia’s economic system is market-oriented by tradition. Substantial revenues
from the export of oil and petrochemical products have enabled Saudi Arabia to take
advantage of the opportunities its underdevelopment presented and to systematically
develop the country’s economic potential.
Income is defined as the economic wealth gained by an individual or a firm in exchange
for their performance on a previously agreed upon task. Income is used to provide daily
necessities on a day-to-day basis such as food, shelter, clothes, fuel, etc. Below is a
graph representing the change in GDP per capita (in US dollars)
As you can see from the graph above Saudi Arabia From 1980 until 2011, Saudi Arabia
GDP per capita PPP averaged 21083.3 USD reaching an all-time high of 33759.0 USD
in December of 1980 and a record low of 18280.2 USD in December of 1987.
As for each citizen in Saudi Arabia earning a higher income, his or her consumption
patterns will surely be affected. These changes in consumptions patterns include
changes in the amount of money spent on durable and non-durable goods such as
food, clothes, houses, cars, jewelry, etc. During the last twenty years, Saudi Arabia has
undergone fundamental economic
and social changes. These changes
were fast and sudden and they
affected the Saudi households'
consumption expenditure behavior.
The latest value for Household final
consumption expenditure, etc. (current US$) in Saudi Arabia was $173,955,000,000 as
of 2011. Over the past 43 years, the value for this indicator has fluctuated between
$173,955,000,000 in 2011 and $1,387,872,000 in 1968.
19681971
19741977
19801983
19861989
19921995
19982001
20042007
2010$0
$20,000,000,000
$40,000,000,000
$60,000,000,000
$80,000,000,000
$100,000,000,000
$120,000,000,000
$140,000,000,000
$160,000,000,000
$180,000,000,000
$200,000,000,000
The Gini coefficient (Gini Index) measures the income distribution with a given country.
The number ranges from 0 to 1, it helps to provide an images of the gap between the
rich and the poor. When the Gini Index is 0, it represents perfect equality and when it is
1, it represents perfect inequality. The Saudi government gives little official data about
its poorest citizens. But press reports and private estimates suggest that between 2
million and 4 million of the country's native Saudis live on less than about $530 a month
about $17 a day considered the poverty line in Saudi Arabia.
Due to some problems with finding data about Saudi Arabia`s income distribution and
wealth distribution I found other relevant information that can be implemented in this
situation.
Higher Gini coefficients signify greater inequality in wealth distribution, with 1 being
complete inequality and 0 being complete equality. "The top 10 per cent owned 71 per
cent of world wealth, and the Gini coefficient for the global distribution of wealth is
estimated to be 0.804, indicating greater inequality than that observed in the global
distribution of consumption or income
Saudi Arabia
Population
(1000s)
Wealth
per Capita
Wealth
per Adult
Share of
world
wealth (%)
GDP per
Capita
Share Of
the world
GDP (%)
Wealth
Gini
Index
21484 22025 43046 0.29 12374 0.57 0.737
- Progress in the Industrial Production
Production of the manufacturing industries in the Kingdom has witnessed a steady
progress over the past years. As you can see from the graph below, total GDP (in
constant prices) achieved by the manufacturing industries increased from the level of
SR 15 billion in 1975 to more than SR 124 billion at the end of 2011.
Also, the rate of the
manufacturing
industries' growth
continued to increase throughout this period, at an average of 6% annual growth rate,
which is considered the highest among the other economic sectors. Owing to the
substantial growth achieved by the manufacturing industries during this period, the
contribution of the sector in the country's GDP has increased from 4.1 % in 1975 to
13.3% at the end of 2011.
On the hand the contribution of the manufacturing industries sector in the non-oil GDP
increased from 7.8% in 1975 to 18.3% in 2011. These rates show the success of the
development plans in pushing forward the industrial progress and the fruitful
cooperation these plans received from the private sector.
Since 1980, Saudi economic growth has failed to keep pace with population growth,
resulting in a dramatic fall in per capita incomes in constant 2000 dollars from
US$28,600 in 1981 to $6,300 in 2000
A more important aspect in the development of the manufacturing industries in the
Kingdom is indicated by the change that occurred in the sectorial composition of the
Saudi manufacturing over the past period, as the share of the manufacturing industries
(other than oil refining) in manufacturing GDP increased from (57%) in 1975 (at
constant prices) until it reached (82%) by the end of 2011. Being one of the largest
economies in the world Saudi Arabia record track it was not until the 1973 oil crisis that
the country saw rapid growth and GDP per capita (PPP) shrunk by 0.8% on average
during the 1980s, grew 2.1% during the 1990s and 4.4% during the 2000s. Annual
imports grew 44% on average during the 1970s, but shrunk 1.9% during the 1980s,
grew again 2.4% during the 1990s and 14% during the 2000s.
A strategy is being developed by Saudi Arabia to combat poverty by providing the poor
with opportunities to participate in the economy and assist them in improving their
standard of living. The plan was created to support balanced economic development,
empowerment and employment of the poor, development of human capital. Between
1990 and 2015, the first of the goals were to halve the proportion of people living on an
income of less than USD 1 a day. In 2009, the Ninth Development Plan which is a
continuation of the developmental approach adopted by the Kingdom throughout the
past four decades. This approach combines the directive planning of government
activity and indicative planning of private activity within a framework of developmental
paths and the future vision defined by the long-term strategic planning reported that
0.06 percent of families in the Saudi population live on a per capita income of less than
two dollars a day; 0.05 percent of the population lives below the extreme poverty level,
less than USD 1 per day.
Examining the role of oil revenues in
government finance makes this clear: in
2011, government revenue represented 49.9
percent of GDP, and nearly all of that
consisted of oil revenues, at 46.2 percent of
GDP.
As for other sectors of the Saudi economy, in 2009 agriculture represented 3.2 percent
of GDP, industry 60.4 percent, and services 36.4 percent. As the country grew
consumptions was alongside technological advancements and changes before because
used have a lower income then today so items that were considered to be luxury goods
have now turned into necessities and this shows the increase in personal consumption
as a percentage of the GDP. Consumers today have the willingness and the money to
spend it on item such as luxurious cars, mobile phones, personal computers etc. The
Gini Coefficient is 73.1 % which means that Saudi Arabia has an unequal income
distribution so that gives a clearer picture about the equality especially with past records
before the Gini Coefficient was less than today, that tells us that the country is increase
in inequality and different living standards across all households within the kingdom.
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