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Structural Transformation Options of the Saudi Economy Under Constraint of Depressed World Oil Prices

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  • Salaheddine Soummane, Frédéric Ghersi, and Franck Lecocq

Abstract

We implement the hybrid (energy-economy) recursive-dynamic multisector IMACLIM model with important adaptations to Saudi macroeconomics. We design two scenarios reflecting both the Saudi Vision 2030 economic development program and Nationally Determined Contribution (NDC) to greenhouse gas mitigation: Continuity of previous plans to expand energy-intensive activities under maintained energy-pricing policies, versus Transformation by economic diversification away from hydrocarbon-related activities and fiscal and energy-pricing reforms. We show that, compared to Continuity, Transformation improves activity, employment and public budget outlooks, while considerably abating the energy intensity of GDP and total CO2 emissions. Our results thus point at the relevance of economic diversification as both a hedging strategy against international climate change mitigation depressing oil markets and a national climate mitigation strategy for Saudi Arabia. However, the successful advancement of the reforms necessary for diversification remains conditional to setting a suitable institutional framework for a competitive economy.

Suggested Citation

  • Salaheddine Soummane, Frédéric Ghersi, and Franck Lecocq, 2022. "Structural Transformation Options of the Saudi Economy Under Constraint of Depressed World Oil Prices," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3).
    • Handle: RePEc:aen:journl:ej43-3-soummane
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    Cited by:

    1. Yusifzada, Tural, 2022. "Response of Inflation to the Climate Stress: Evidence from Azerbaijan," MPRA Paper 116522, University Library of Munich, Germany, revised 20 Sep 2022.
    2. Elvis K. Ofori & Simplice A. Asongu & Ernest B. Ali & Bright A. Gyamfi & Isaac Ahakwa, 2024. "Environmental impact of ISO 14001 certification in promoting Sustainable development: The moderating role of innovation and structural change in BRICS and MINT, and G7 economies," Journal of Africa SEER Centre(ASC) 24/021, Africa SEER Centre(ASC).
    3. Anwar A. Gasim & Walid Matar, 2023. "Revisiting Energy Subsidy Calculations: A Focus on Saudi Arabia," The Energy Journal, , vol. 44(1), pages 245-276, January.
    4. Lansheng Cao & Sayed Fayaz Ahmad & Yajun Wang & Syed Jamal Shah & Muhammad Ibrahim & Fuad Mohammed Alhamdi & Mahmoud Izzat Allaham & Ansar Abbas, 2025. "Examining the relationship of inflation, gross domestic product, oil price, foreign direct investment, and trade openness on unemployment in Saudi Arabia," Humanities and Social Sciences Communications, Palgrave Macmillan, vol. 12(1), pages 1-12, December.
    5. Durand-Lasserve, Olivier & Almutairi, Hossa & Aljarboua, Abdullah & Pierru, Axel & Pradhan, Shreekar & Murphy, Frederic, 2023. "Hard-linking a top-down economic model with a bottom-up energy system for an oil-exporting country with price controls," Energy, Elsevier, vol. 266(C).

    More about this item

    JEL classification:

    • O44 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Environment and Growth
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models

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