THE LEGATUM PROSPERITY INDEX™ 2016

Bringing Prosperity to Life

Saudi Arabia

Ranked 85th of 149

At a glance

Ranks

85 th on the Legatum
Prosperity Index™

70th
50th
95th
83rd
45th
74th
133rd
45th
71st

SUB-INDEX RANKINGS

In the Prosperity Sub-Index rankings, Saudi Arabia performs best on Social Capital and Health and scores lowest on the Personal Freedom sub-index.

Visit our Rankings table to see how Saudi Arabia compares to other countries.

Prosperity Gap

The ‘Prosperity Gap’ takes a country's GDP and uses it as the yardstick to measure a nation's expected Prosperity Index ranking.

Saudi Arabia has a large prosperity deficit, typical of countries in the Gulf. Together with Russia and Iran, it sees the biggest Personal Freedom deficit in the world. The Kingdom is also among the worst deliver in the Middle East in terms of Economic Quality and Governance.

Note:
In the chart above, each dot represents a country. The curve shows the general tendency with which prosperity increases as GDP per capita increases. If a country falls below the curve, then we can say that compared to all other countries, it is under-delivering prosperity for its citizens. Likewise, if a country rises above the curve, then we can say that it is over-delivering prosperity for its citizens. Learn more about the Prosperity Gap here.

Alternatively, have a look at the Prosperity Gap view on our Rankings table for a full list of countries and to see how each of them are performing on the various sub-indices.

Commentary

The 2016 Prosperity Index shows Saudi Arabia as a country with many of the hallmarks in its prosperity of oil-reliance. Governance and Personal Freedom are subdued and more worryingly, a lack of competitiveness and diversification is apparent in the Economic Quality and Business Environment sub-indices. Yet positive signs are seen. Overall prosperity has increased in absolute terms over the last decade, social tolerance has strengthened with more positive attitudes towards immigrants and ethnic minorities, and the government is working hard to improve the economy.

Personal Freedom and Economic Quality in Saudi Arabia and GCC countries.
Personal Freedom and Economic Quality in Saudi Arabia and GCC countries.

Saudi Arabia has not been wholly unsuccessful in its oil dependence. With almost 90 percent of government revenues generated from the nationalised oil industry, the House of Saud has been relatively successful in using subsidies and welfares in exchange for people’s consent to their rule. The prosperity impact of this has been mixed. In some ways, it has helped, for example by keeping unemployment low and enabling direct intervention to make labour markets more flexible and to improve infrastructure.

However, the downside is the impact it has on Governance, where Saudi Arabia ranks 95th, and Personal Freedom, where it ranks 133rd. The constraints on political right, elections, and civil liberties all severely constrain Saudi Arabia’s prosperity. However, there are positives, as tolerance has been improving, rising by almost 20% since 2007. Female involvement in social and political affairs has been more accepted, and the empowerment of women made a breakthrough in 2015 when for the first time in the Kingdom’s history women were eligible to vote and run for office in municipal elections.

At least in the short term, the main obstacle to Saudi Arabia continuing its climb up the prosperity ladder is its economy. Low labour force participation and weak competitiveness poses a great threat to the sustainability of prosperity delivery in the Kingdom, particularly against a backdrop of a slashed oil price. At merely 57 percent, Saudi Arabia has the lowest labour force participation rate among GCC countries, and is significantly lower than the world average level, a 12 percent difference. The propensity of female citizens to join the labour market is limited, a significant foregone economic asset. As a result, even with a fairly high level of satisfaction with living standards and near absence of absolute poverty thanks to generous state subsidies and welfare programmes, the Kingdom only ranks the 70th globally in Economic Quality. In fact, it is the abundance of welfare in various forms that prevents Saudi Arabia from realising its economic potential. Provision to Saudi nationals of jobs in the bloated state sector makes education attainment less necessary and shores up wage expectation to the point that crowds out employment of nationals in the private sector.

However, the weak oil price has forced a change of direction. In 2016 a series of policy announcements have been made, indicating a reduction in energy subsidy, a downward adjustment in public sector wages, and plans to improve Saudi workers’ skillsets and upgrade infrastructure. These measures should be welcomed as they will improve economic competitiveness and help drive prosperity. In the meantime, the Kingdom should also aim for further economic reforms to build a diversified economy less dependent on the oil industry and equipped with a more competitive labour market.


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Data

How to read this graph:
When comparing multiple countries on a spider chart, data points that appear
further away from the center represent a better performance to the points that are closer to the center.