Despite the bleak global economic backdrop, this Persian Gulf kingdom has managed to stay ahead of the curve thanks to careful economic planning, efforts towards economic diversification, long-term investments in infrastructure and education, and high commodity prices. The country’s macroeconomic framework is an ideal to aspire to for other nations. Between 2008 and 2012, Saudi Arabia had the thirdfastest growing economy in the G-20, after China and India.

In only 13 years, between 1999 and 2012, the kingdom’s gross domestic product (GDP) increased fivefold. According to the International Monetary Fund (IMF),it has the strongest fiscal position among developed economies, which consists of the lowest debt-to-GDP ratio and one of the highest fiscal balances. The outlook for the future is also positive, as the non-oil private sector is expected to grow by 7.6 per cent in 2013 and the overall GDP by 4.4 per cent.

Generous budget surpluses fuelled by high energy prices and a strong banking sector characterised by high liquidity help to support a gamut of large-scale infrastructure projects, such as the construction of six economic cities to boost economic diversification and a financial city in the north of Riyadh, as well as numerous medical cities and education and research clusters. The past three years alone have seen the inauguration of such state-of-the-art facilities as the new campus of the Princess Nora bint Abdul Rahman University, the largest women-only university in the world.

Patrice Couvegnes, the Managing Director of Banque Saudi Fransi, the sixth-largest bank in the country, explains: “This market is very promising. The sheer size of the country – it is the same size as Western Europe – and of its economy – it is the Arab world’s largest – makes it attractive for foreign investment. The economy is flooded with liquidity and the government’s large-scale projects help boost economic growth. This is an economy with an excess of reserves, an economy that averages annual growth of 4 per cent and with budget surpluses thanks to high oil prices.”

Approximately a third of the country’s current population of 27 million is made up of foreigners, who account for 90 per cent of private sector workers. This challenge is further compounded by the fast growing and young population, which means that the number of graduates entering the workforce increases every year. Unemployment among those under 30,who make up a staggering 64 per cent of the population, stands at 27 per cent, dangerously similar to the unemployment rates present in North African countries. According to estimates of the Human Resources Development Fund (Hadaf), as many as 2 million Saudis will be unemployed towards the end of 2013.

Another important challenge concerns the delicate balance the country strives to attain between ensuring water and energy security. Saudi Arabia may be energy rich, but its fast growing and increasingly industrialised economy, coupled with its rapidly expanding and highly urban (83.6 per cent) population, is placing unprecedented pressure on the power grid. Read the Country Report here