The Impact of Foreign Trade on Economic Growth in the Kingdom of Saudi Arabia for the Period (1991-2019)

Abstract

This study aims to investigate and analyze the impact of foreign trade on economic growth in the Kingdom of Saudi Arabia, for the period (1991-2019), by using the cointegration method by employing the Johansen test to determine the long run regression relationship and its direction. Moreover, the study estimates the error correction model (ECM) to measure the deviations that occur in the short run. The study concluded with the following findings: First, there is a long-term equilibrium relationship between the variables of the model. Second, the relationship between average per capita GDP and merchandise exports is statistically positive and significant. Third, there are deviations in the equilibrium relationship at the short-term level. Fourth, there is a negative effect of increasing import rates on economic growth. Fifth, there is a positive effect of the increase in oil prices on economic growth .In light of these findings, the study recommends the following: First, working on creating and developing new productive areas that contribute to diversifying exports and increasing their rates, in exchange to reducing imports, which will positively affect economic growth. Second, developing economic policies and programs aimed at stimulating and encouraging investments in precision tech industries and related services within the framework of the Kingdom's National Vision 2030. Third, conducting more econometric studies to examine the impact of foreign trade on economic growth represented by other measures such as consumer spending and unemployment and employment rates.