Author(s): Mohammed A. Aljebrin
For decades, both developed and developing countries have adopted export-led growth strategies to achieve economic growth, based on the export-led growth hypothesis (ELGH). The ELGH purports that there is a positive long-run relationship between exports and economic growth, and related research from Asia and Africa has yielded mixed results. However, limited studies have been conducted in the Middle East.
Using the ELGH as a framework, this study evaluated the contribution of non-oil exports to economic growth in Saudi Arabia since the implementation of development plans for facilitating growth in non-oil exports. Time series data from 1990 to 2017 for GDP, labor, capital, and non-oil exports were analyzed using the augmented Dickey-Fuller procedure followed by the Johansen cointegration method with a vector error correction model to determine the long- and short-run relationships among these variables. The analysis confirmed a significant positive relationship between GDP and non-oil exports as well as between capital and GDP in both the long and short run, indicating at least unidirectional causality. However, there was no significant relationship between labor and growth.
The results confirmed the significant contribution of non-oil exports to economic growth in Saudi Arabia, providing support for the ELGH. Combined with other research, the findings suggest that Saudi Arabia should diversify its exports, simplify its export procedures, develop new infrastructure and capital to support the production of exports and domestic use, and facilitate collaborative relationships among oil and non-oil sectors. Given that the ELGH argues that the export sector generates growth by increasing aggregate levels of labor and capital, addressing issues related to labor must also be considered. This study contributes valuable, context-specific information to planners, decision makers, and practitioners that can be used to facilitate the implementation of effective policies for achieving a balanced, sustainable economy in Saudi Arabia.