Dutch Disease in Saudi Arabia

Saudi government to finance economic development introduced the liquidity . High inflation was experienced in the 1975 of 35 then it later declined and continued fluctuating around 5 and-5

The Dutch disease theory predicts a decline in the manufacture sector since domestic manufactures are more expensive than foreign manufactures . In Saudi Arabia the manufacturing sector was already small before the discovery of oil so the oil revenues just brought about opportunity to expand domestic manufacturing sector thus the manufacturing sector increased instead of declining as expected with the theory

A possibility

of a decline in the agricultural sector is predicted by the theory , as the agricultural labour will move from this sector to a more booming one but in Saudi Arabia despite the decrease in agricultural employment there was increased agricultural production especially between 1981 and 84 as a result of the agricultural se4ctor subsidies

Saudi Arabia suffered an over heated labour market and foreign labour was demanded thus changing the labour force this was to calm the Dutch disease symptoms related to the already overheated market , the private sector imported the foreign workers into the Kingdom the foreign worker have played an important role in the service and oil sectors and contributed a great deal to the Saudi economy

Industrialization has infact been facilitated by the growing oil revenues this was facilitated by the investment of the government in the processing plants that consume hydrocarbon resource this showed how the government tried to diversify the economy this also brought about infrastructure since it led to the building of pipelines for gas , gas gathering systems , building of sewerage , electricity water , telecommunication systems , ports and laying an immense road network

From all the above we can draw an inference whether the Dutch ailment has affected Saudi Arabia , and their management of the...