The most dramatic feature of the inflation graph is the sharp spike in the mid 1970s with the inflation peaking at about 35 percent in 1975 (Alsharari 2023). This was primarily caused by the oil boom or the 1973 oil price shock. As oil prices skyrocketed, there was a massive increase in oil revenues and Saudi Arabia’s government spending increased massively. The underdeveloped financial market and the structural rigidities such as bottlenecks in the form of skilled labor shortage, limited industrial capacity, and limited agricultural resources prevented an equivalent increase in production and were responsible for inflationary pressure (Alsharari 2023). Following this, the oil revenues falling led to a decrease in aggregate demand and in the eighties and nineties the rate of inflation fell, with some years showing deflation rates. The graph shows low and stable inflation from the 1990s until early 2000s. Their most recent spike/shock is in 2008 with the inflation rising to 9.9 percent. This was mainly because of rising food and housing costs coupled with expansionary fiscal policies (Alsharari 2023). The inflation rate has decreased from 2008 till 2020 because of several reasons, such as the government’s responses and the global financial crises.

Saudi Arabia’s unemployment rate has largely followed global trends, with a moderate decline in the late 90’s, early 2000s as the internet fostered growth in non-oil sectors. Unemployment, however, was relatively stable during the Great Recession due to high oil prices. Understandably, the country also faced a spike in unemployment during the COVID 19 recession, but has quickly recovered with the rate of unemployment falling to its lowest level in over 30 years. 

Evidence from the graph suggests that Saudi Arabia’s GDP per capita reflects volatile fluctuations over time often dependent on global energy prices and oil exports. 

In the 1970s, following the 1973 oil crisis, oil prices rose significantly leading to a sharp rise in the country’s GDP per capita (Gibs, 2024). This oil boom helped increase government revenues as well as national income. However, soon after it followed the mid 1980s oil price collapse. GDP per capita fell dramatically and roughly remained at the level throughout the late 1980s and 1990s. Beginning in the early 2000s, we can see another significant increase in the macroeconomic indicator likely due to stronger demands and higher oil prices. Unsurprisingly, we see a decline later in 2020 due to the global pandemic crisis which led to reduced global energy demand. GDP per capita rebounded in 2022 as oil prices surged, reaching one of the highest levels in the country’s history, and then moderating slightly.  This trend of alternating levels of GDP is indicative of its dependence on oil and energy demands.

Saudi Arabia’s total labor force has grown steadily over the past decades, rising from approximately 50 million workers in the late 1990s to about 65 million in recent years. The most rapid surge in employment occurred between 2005 and 2015, a time highlighted by expansion of the private sector, higher oil revenues, and investments. Constructions, services, and energy related industries employed both domestic and foreign labor. A noticeable decline is evident around 2017-18 driven by changes in policy under vision 2030, reduction in the number of foreign labor, and lower oil prices (IMF, 2018). Overall, the general upward trend of labor force participation shows strong population growth, and economic expansion. However, sustaining this could pose a challenge as Saudi Arabia works on diversifying away from oil and also encouraging labor participation among the female and youth population.