Governance of public spending avenues by oil prices, oil revenues, and GDP in Saudi Arabia: proportionate sensitivity and trend analysis


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Saudi Arabia is a petroleum resource-rich country, and half of the GDP of Saudi Arabia is based on the Oil Sector Revenue (OSR). The OSR is governed by the Oil Prices (OP), while GDP is also affected by the OSR in petroleum exporting companies. The volatility of OP governs the OSR and GDP positively and perfectly as the oil sector contributes approximately half of the GDP of Saudi Arabia. The study analyzes the governance of the Public Spending Avenues (PSA) by the OP, OSR, and GDP in the long and short run and based on the secondary data taken from the website of the Saudi Arabian Monetary Authority (SAMA). Coefficient of Variations (CV), Chain-based Index (CBI) numbers, Fixed-based Index (FBI) numbers, and Analysis of Variances (ANOVA) of OP and other dependent variables calculated to get the normality, sensitivity, trend, and significance difference among the sensitivity and trend of variables, while Pearson’s correlations establish the cause-effect relationship among the variables. The study reveals that oil price volatility does not affect the OSR, GDP, and ultimately public spending in the long run. However, there is governance of volatility of OP that can be seen on OSR, GDP, and ultimately on PSA in the short run. Saudi Arabian government enhances its spending on PSA and especially on education while lowering the OP. There is a need to diversify the income resources to minimize the reliability of oil prices and budget deficit and consider the sensitivity of oil prices on the economy by the policymakers to formulate the policies to minimize the impact of volatility of OP on the economy.

The author would like to thank the Deanship of Scientific Research, Prince Sattam Bin Abdulaziz University, Saudi Arabia.


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    • Figure 1. Process of governance of public spending by the oil prices
    • Table 1. Variability of OP, OSR, GDP, and PSA in Saudi Arabia
    • Table 2. Cause and effect relationship among OP, OSR, GDP, and PSA in Saudi Arabia (2011–2018)
    • Table 3. Similarity among the oil prices, oil sector revenue, GDP, and PSA in Saudi Arabia (2011–2018)
    • Table 4. Contribution of the oil sector to GDP and its sensitivity and trend (SR million)
    • Table 5. Comparative sensitivity of public spending proportionate to the oil sector and GDP
    • Table 6. Comparative movement of public spending proportionate to OSR and GDP
    • Table 7. Summary of comparison of CBI and FBI between OSR and GDP of Saudi Arabia
    • Table A1. FBI of oil prices, oil sector revenue, GDP, and public spending
    • Table A2. CBI of oil prices, oil sector revenue, GDP, and public spending
    • Table A3. Public spending avenues proportionate to GDP (%)
    • Table A4. Public spending avenues proportionate to oil sector revenue (%)
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