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Saudi Arabia, Economy

Agriculture and livestock raising have historically been the basic economic activities of Saudi Arabia, but since the development of the oil industry, the government has sought to diversify its industrial base and improve its basic economic structure, developing roads, airports, seaports, and the power industry. Through a sharp increase in oil prices beginning in 1973, Saudi Arabia began to amass a tremendous cash reserve. The government used its newfound wealth to transform its economy at a rate almost without precedent in modern history. A lack of trained and skilled labor was partially offset by millions of guest workers. By the mid-1980s, however, oil prices were in decline as a system of production quotas created by oil-exporting nations began to break down, and high prices encouraged exploration and development of oil reserves elsewhere. Saudi Arabia began to spend more than it took in, drawing down its cash reserves. By the mid-1990s continued declines in oil sales forced the Saudi government to reduce expenditures. Residents anticipated a reduction in government subsidies on telephone calls and public services, and consideration was given to privatization of some government assets.

The estimated annual budget in the mid-1990s included revenues of about $39 billion and expenditures of about $50 billion. Saudi Arabia’s gross domestic product (GDP) in 2000 was $173.3 billion. The government was the largest employer in Saudi Arabia in the mid-1990s, engaging about 34 percent of the workforce. Industry employed 28 percent, including 5 percent in the oil industry, while 22 percent were in trade and other services, and 16 percent in agriculture or fishing.

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