The relationship between foreign direct investment and the current account balance: an applied study in the Saudi economy for the period: (1970-2019)

Abstract

The study aimed to demonstrate the relationship between foreign direct investment (FDI) net inflows and the current account balance (CA) in the Saudi economy for the period 1970-2019. The study relied on the descriptive and analytical approach in the theoretical framework. Using the Autoregressive Distributed Lag Model (ARDL) technique, the study concluded that FDI is concentrated in the industrial sector and affects it. Its role in the local economy is still low. It also reached the sustainability of the current account surplus, despite successive deficits in the secondary income account, and the existence of a long-term and short-term complementary relationship. Bidirectional association between them is achieved in the long-term. The study recommended several recommendations, the most important of which are: Taking the necessary policies by the legislator in the Kingdom of Saudi Arabia to direct FDI in less developed sectors such as agriculture, forestry and fishing, and encouraging the employment of reinvested profits through incentive policies.