Situated at the heart of the Middle East, Saudi Arabia’s geopolitical importance is underscored by the presence of 17% of proven global oil reserves within its territory, and its stature as the birthplace of Islam. Since gaining independence in 1932, establishing the Aramco national oil company in 1933 and first discovering oil in the Dammam field in 1938, the Kingdom has undergone a substantial transformation that has shaped its domestic and international standing. It has capitalised on its strategic location at the crossroads of Africa and Asia to emerge as the only Arab country in the G20, and a vital gateway for trade and cultural exchange.
More recently Saudi Arabia has embarked on a transformation agenda under Vision 2030 – a wide-ranging roadmap for socio-economic development which seeks to diversify the economy, modernise society and create new growth opportunities. Underpinned by oil revenue – which accounts for approximately 75% of the government’s budget – the Kingdom is funding a series of so-called giga-projects and a programme of strategic investment aimed at future-proofing its economy by developing high-potential industries, including tourism, manufacturing and mining. As geopolitical tensions abroad and the ongoing global energy transition generate uncertainty over future demand, stimulating non-oil growth will remain at the forefront of the Saudi growth strategy.
Geography & Climate
At 2.15m sq km, Saudi Arabia is the largest country in the Middle East, accounting for approximately 80% of the Arabian Peninsula – making it the 13th-largest country in the world and the fifth-largest in Asia. The Kingdom is covered by a series of interconnected deserts and scrubland, the largest of which is the roughly 650,000-sq-km Rub Al Khali (Empty Quarter) in the south, which is the biggest continuous sand desert in the world. Saudi Arabia contains numerous wadis, or dry riverbeds, but no natural lakes, rivers or streams. According to the World Bank, less than 1% of the total land area is well suited for agriculture.
Saudi Arabia shares land borders with Iraq, Jordan, and Kuwait in the north; Qatar and the UAE in the east; and Oman and Yemen in the south. It is also connected to Bahrain off its east coast by the 25-km King Fahd Causeway. The Kingdom’s west coast runs along the Red Sea, while the eastern region spans the Al Ahsa Oasis and the oil-rich Eastern Province.
Saudi Arabia is hot and extremely arid year-round, like much of the rest of the Gulf, and does not have clearly defined seasons. May through September are typically regarded as the summer months, during which temperatures can be as high as 45-55°C. The heat is felt the most in the interior, which is also characterised by low humidity.
Temperatures cool in the winter months of November to February to an average of 19-25°C. Winter temperatures can drop below freezing in central and northern Saudi Arabia, especially at night, with occasional snowstorms in the north. During the seasonal transition period from February to May, violent sandstorms, known as haboobs, sometimes occur. Average annual precipitation is around 8 cm, almost all of which falls between December and March, when tropical winds can cause monsoons in the south and south-west.
History
Even though the vast majority of the Arabian Peninsula is covered by desert, nomadic tribes have called the area home for thousands of years. The earliest recorded archaeological evidence discovered on the peninsula dates back to the third millennium BCE, when the Dilmun civilisation occupied an area that included the modern-day countries of Bahrain, Oman and Qatar, as well as parts of Iran and Saudi Arabia’s Eastern Province. In the first millennium BCE, the ancient Thamud tribe moved from southern Arabia to what is now Al Madinah region, where they occupied a series of towns until the middle of the first millennium CE.
The history of the Arabian Peninsula from 600 CE onwards was largely characterised by the rise of Islam, which began with the birth of the Prophet Muhammad in Makkah around 570 CE. By the time of his death in 632 CE, the majority of the Gulf had been united under Islam. By 800 CE, as a result of rapid expansion by early Muslim caliphs and leaders, Islam had become the predominant religion over a wide area, spanning from what is now Spain and Portugal in the west, to Central Asia in the east.
Early States
With political power concentrated in Damascus and Cairo during the medieval period, a handful of nomadic and semi-nomadic groups came to control the Arabian Peninsula. Among the most powerful of these groups were the Hashemites, or Banu Hashim, a clan within the larger Quraish tribe that is descended directly from Prophet Muhammad. They came to control much of the eastern Hejaz region of Arabia during the second millennium CE.
The Al Saud family, which today rules Saudi Arabia, has held intermittent control of the Nejd and other parts of central and eastern Arabia since the mid1700s. In 1744 Muhammad ibn Saud, then-head of the Al Saud family, established an alliance with the imam Al Wahhab to unify the Arabian Peninsula under the banner of Islam. The first Saudi state – which was based in Diriyah – controlled a large area until 1818, when the Ottomans recaptured it during the course of the Ottoman-Saudi war.
During the period of the second Saudi state, which was formed in the wake of the war and based out of Riyadh, the Al Saud family ruled over a substantial area in central Arabia from the early 1820s until 1891. The state eventually fell when it succumbed to tribal infighting. In the wake of this development, the then-head of the family, Abdul Rahman bin Faisal Al Saud, fled to Kuwait with members of his family, including his son Abdulaziz Al Saud. The latter is the founder of the third Saudi state, which is synonymous with modern-day Saudi Arabia.
New Dawn
In 1902, when he was about 26 years old, Abdulaziz Al Saud returned to Riyadh and conquered the city with a small group of men. Over the next few years the young ruler worked to consolidate his control over most of the Nejd region, where the Al Saud family remained popular among the local inhabitants. By 1912 Abdulaziz had gained control of most of central and eastern Arabia, and over the following two decades he continued to expand his reach across the peninsula. In September 1932 Abdulaziz announced the formation of the Kingdom of Saudi Arabia and named himself king.
Six years after the modern state was formed, US company Standard Oil discovered oil in commercial quantities in the Eastern Province city of Dammam. The find, which eventually revealed the second-largest reserves of crude oil in the world, changed the young country forever. By the mid-1950s oil exports accounted for the majority of government income, and Saudi Arabia embarked on a series of largescale, government-led economic development projects funded by this new revenue stream.
Population & Demographics
With a relatively small population of around 3m at the time of its founding, the Kingdom was predominantly inhabited by nomadic and semi-nomadic people until the 1960s. During this period urbanisation accelerated, fuelled by new oil revenue. Consequently, by 2024 more than 85% of Saudi Arabia’s population resided in urban areas. According to the most recent census results released in May 2023 by the General Authority for Statistics (GaStat), the total population stood at 32.2m in 2022, up from 30.8m the previous year. The Kingdom’s population has risen by 34.8% since 2010, with similar rates of growth seen for both Saudi citizens and non-nationals.
Population density stood at about 17 people per sq km in 2023, though the figure is substantially higher in cities and urban areas. As of 2022 Riyadh Province – which is home to the capital and largest city – held nearly 8.6m people, while Makkah Province – where the second-largest city of Jeddah and the holy city of Makkah are located – held over 8m people. The Eastern Province and its capital of Dammam counted over 5.1m people.
The fifth census in the Kingdom’s history was conducted in 2022 instead of 2020 due to the Covid-19 pandemic. According to the results, Saudi nationals accounted for 58.4% of the population – which translates to some 18.8m people – while non-nationals made up the remaining 41.6% – equating to around 13.4m people. The Kingdom’s population is young, with a median age of 29 and an estimated 60% under the age of 30. Similarly, it has a gender ratio of approximately 61% male to 39% female.
The foreign population, which represents the world’s third-largest immigrant cohort, come from a variety of South-east Asian countries, including Bangladesh, India and Pakistan, as well as from Egypt, the Philippines and Yemen, among other places. The Kingdom is also home to a large Western population, including nationals from Canada, EU, the UK and the US. The majority of expatriates live in the capital, Riyadh, or other large urban centres.
The country is pursuing a policy of Saudiisation in many industries, whereby Saudi nationals fill a stipulated minimum proportion of jobs in a given sector to reduce dependence on overseas workers in key professions. By the first quarter of 2024 the unemployment rate for Saudi nationals had decreased to 7.6% from 7.8% relative to the previous quarter, while the overall unemployment rate for both Saudis and non-Saudis was 3.5%, compared to 3.4% in the fourth quarter of 2023.
The labour force participation rate for Saudis had increased to 51.4%, in contrast to 50.4% in the last quarter of 2023. However, the overall labour force participation rate had fallen to 66% from 67% in the previous quarter. Notably, a GaStat report revealed that 95.5% of unemployed Saudis were willing to accept job offers from within the private sector, marking a significant shift as citizens traditionally preferred public sector jobs.
Language
The official language of the Kingdom is Arabic, of which there are two predominant dialects: Najdi and Hejazi. The large expatriate population means that a number of other languages are also spoken, including Malay and Tagalog and Urdu. While Arabic is used for official and formal purposes, English is widely spoken by Western expatriates and in places of business. Most road signs in the country are written in both Arabic and English.
Religion
As the birthplace of the Prophet Muhammad and the home of Makkah and Al Madinah, Saudi Arabia is an Islamic country, with the king holding the title of Custodian of the Two Holy Mosques. The majority of Saudis are Sunni Muslim, while a minority – mostly living in the Eastern Province – are Shia. The Wahhabi ideology, a strict branch of Sunni Islam espoused by the 18th-century imam Muhammad ibn Abd Al Wahhab, has played an important role in society since the first Saudi state was created.
Religion is central to social, political and economic life, and under the Basic Law of Saudi Arabia, which was issued by King Fahd bin Abdulaziz Al Saud in 1992, the Quran serves as the basis for all the Kingdom’s laws, rules and regulations. Islam informs and defines all areas of life, including the legal system, public behaviour, marital relations, culture and the calendar. All Saudi nationals are required to abide by sharia law, which mandates daily public prayer and the paying of zakat, or religious charity. Likewise, daily prayers and fasting during the holy month of Ramadan are widely observed.
Enforcement of strict religious rules has eased somewhat in recent years, alongside efforts to empower women to play a more active role in the economy and society. Through the Hajj and Umrah pilgrimages, which are considered religious obligations and cornerstones of Islamic life, Saudi Arabia hosted 1.8m pilgrims for Hajj and 13.5m for Umrah in 2023, which were record-breaking figures. The Kingdom aims to welcome 30m Umrah performers and 6m pilgrims annually by 2030.
Economy
In 2023 Saudi Arabia’s GDP experienced a decline of 0.8% compared to the previous year. This was due in large part to a significant drop in the oil sector, which fell by approximately 9%, primarily as a result of lower prices. Despite this overall contraction, the non-oil sector showed considerable resilience, growing by 4.4% during the same period. Looking forwards, the IMF has projected that Saudi Arabia’s GDP will expand by 1.7% in 2024 and 4.7% in 2025, which is expected to be driven by a recovery in oil prices, sustained investment in infrastructure and continued efforts to diversify the economy. According to the IMF, Saudi Arabia is categorised as an emerging market economy, a grouping that includes countries such as China, India, Russia and Turkey. The World Bank, for its part, classifies the Kingdom as a high-income, non-OECD country. According to the latest data from the World Bank, Saudi Arabia ranked as the 19th-largest economy in the world in 2023, with a combined GDP of $1.1trn.
Hydrocarbons income has traditionally accounted for the vast majority of public revenue; however,664 in 2016 the government launched Vision 2030, a bold economic diversification plan with the central aim of transitioning the economy away from oil (see Economy chapter). As a result, the Kingdom’s economic performance has been driven by both oil and non-oil activities in recent years, both of which have recovered as pandemic pressure faded. Crude petroleum and natural gas activities remained the largest contributor to GDP in 2023, accounting for 25.4% of the total. This sector was followed by government services with 15.7%; wholesale and retail trade; restaurants, and hotels, which comprised 9.7%; manufacturing excluding petroleum refining at 8.8%; petroleum refining activities, which represented 6% and real estate which made up 5.9%.
Vision 2030
In early 2019 Saudi Arabia redesigned the governance structure of Vision 2030, announcing the launch of the National Industrial Development and Logistics Programme (NIDLP) and bringing the number of Vision Realisation Programmes to 13. NIDLP endeavours to guide growth in the high-potential industry, mining, energy and logistics sectors. By 2024 over 120 initiatives had been completed two years ahead of schedule, including the launch of four special economic zones in 2023.
In June 2021 Saudi Arabia launched its National Transport and Logistics Strategy – a comprehensive plan to increase logistics’ contribution to GDP from 6% in 2022 to 10%, and boost the sector’s non-oil revenue to $12bn by 2030. In 2023 the Kingdom jumped 17 spots to 38th out of 155 countries in the World Bank’s Logistics Performance Index, less than two years after the launch of the strategy. These results are attributed in large part to the country’s strides in performance efficiency through several sub-indicators, including trade and transport infrastructure, shipment frequency tracking and tracing facilities, Customs clearance and quality of maritime freight, according to the report.
In October 2021, in line with the Paris Agreement on climate change and Vision 2030, the Kingdom announced a target of becoming a net-zero economy by 2060 and launched the Saudi Green Initiative (SGI), which represents the first wave of over 60 programmes and projects designed to contribute to the growth of the green economy. The SGI’s objectives include developing clean energy, offsetting emissions and protecting the environment. It also aims to maintain an investment fund for circular carbon economy solutions, targeting more than SR700bn ($186.6bn) in green investment by 2030.
To strengthen this commitment, in March 2023 the Cabinet approved the establishment of a Regional Centre for Climate Change, headquartered in Riyadh. The centre aims to encourage adaptation to climate change, reduce its effects and achieve sustainability in line with the goals of Vision 2030.
Saudi Arabia envisioned deploying 9.5 GW of green energy by 2030 as part of its National Renewable Energy Programme – which is mandated to diversify the Kingdom’s energy mix. However, its latest revision in 2023 has raised the target to 130 GW of renewable power capacity by the same year. This goal is to be achieved through enhanced policies, competitive auctions and financial measures.
In March 2024 the Kingdom launched the Tourism Investment Enablers Programme (TIEP) to make investing in the Saudi tourism sector more attractive for both international and domestic investors. The Kingdom’s strategic initiatives, such as its commitment to invest $800bn in its tourism infrastructure and the eVisa programme, continue to advance Saudi Arabia’s position as a leading global tourism destination. The TIEP is anticipated to bolster the sector’s contribution to GDP by adding 42,000 new hotel rooms and generating around 120,000 employment opportunities. After achieving the milestone of attracting 100m domestic and foreign tourists in 2023, the Kingdom has set an even more ambitious goal of attracting 150m tourists by 2030.
Investment
The government has worked to open the Kingdom to foreign direct investment (FDI) in recent years. Its reputation for political stability has historically made it a popular destination for FDI in the MENA region. Following a decrease in levels during the prolonged oil price slump starting in 2016, FDI inflows rebounded in 2018. To further cement this growth, in 2021 the Kingdom launched its National Investment Strategy (NIS), designed to empower investors, enhance competitiveness and clarify the partnership between the public and private sectors. The NIS, which is expected to generate SR4trn ($1.1trn) in investment through to 2030, aims to establish investment plans for various sectors. It seeks to increase the private sector’s share of GDP to 65%, elevate the percentage of FDI to GDP to 5.7%, and increase the contribution of non-oil exports to GDP from 16% to 50%.
Private Sector Collaboration
In February 2021, in an effort to attract more FDI and promote domestic production, the government announced it would exclude foreign companies with regional headquarters outside the Kingdom from public tenders from 2024. Under the Regional Headquarters Programme strategy, as of October 2021 Saudi Arabia had licensed 44 international companies to establish regional headquarters in the capital Riyadh, as part of an ongoing push to become a regional commercial leader and to compete further for foreign capital and talent, as well as to diversify the economy (see Economy chapter).
Participating multinationals represent a range of sectors such as technology, food and beverages, consulting and construction, and include companies such as France’s Schlumberger, German-headquartered Siemens, the UK-based PwC and Unilever, and the US’s Baker Hughes, Bechtel, Deloitte and PepsiCo, among others. The Regional Headquarters Programme went into effect on January 1, 2024, and the government had issued more than 350 licences to multinational companies by April 2024.
Additionally, in March 2021 the Kingdom launched Shareek, an investment programme that aims to facilitate FDI through government and private sector collaboration. In March 2023 the Kingdom announced the first wave of projects under the Shareek strategy, totalling $51bn in investment by local companies, including oil giant Aramco and national mining company Ma’aden. The initiative is expected to help the private sector create hundreds of thousands of new employment opportunities, generate $1.3trn and boost the private sector’s contribution to GDP to 65% by the end of the decade.
Figures from the Saudi Central Bank from March 2022 showed that FDI reached $19.3bn in 2021 – its highest level in more than a decade. These results were primarily aided by investment in the expansion of Aramco’s pipeline network. Although FDI dropped by 60% to $7.9bn in 2022, it rebounded quickly, with Saudi Arabia reaching nearly $26bn in FDI during 2023, exceeding the NIS target by 16%.
Energy Resources
Saudi Arabia is one of the most important oil producers in the world, with total proven oil reserves estimated at around 267.2bn barrels. The country has increased its oil production capacity to nearly 13.4m barrels per day (bpd), up from approximately 11.5m bpd in 2022. Saudi Arabia currently has a spare capacity of 3m barrels per day, which accounts for about 2.9% of global daily demand. From 2025 to 2027 Saudi Arabia plans to further boost its oil production capacity, before returning to its current level of 12.3m bpd in 2028.
The main energy player is government-owned Aramco, which controls nearly all the country’s oil and gas reserves, and is estimated to be the world’s largest oil company. In November 2019, in line with Vision 2030, Saudi Arabia made the initial public offering of 5% of Aramco’s shares, successfully raising $25.6bn. In 2022 it posted a record profit of $161bn, although this figure declined to $121.3bn in 2023 on the back of falling oil prices.
Saudi Arabia is one of the five founding members of the Organisation of the Petroleum Exporting Countries (OPEC) and was traditionally considered the global swing producer. In 2017 it spearheaded a historic agreement between OPEC and non-OPEC members to curb global oil production in an effort to stabilise prices, and the Kingdom took the lead on similar measures during the pandemic.
As of the end of 2023, Saudi Arabia’s proven natural gas reserves totalled 229trn cubic feet of gas and 75bn barrels of condensate. This figure has been bolstered by the discovery of the Jafurah field in February 2024, which is estimated to contain an additional 15trn cubic feet of gas and 2bn barrels of condensate. By September 2024 the Kingdom had the lowest intensity of gas burning in gas plants worldwide, at less than 1%, and the country plans to eliminate gas burning by 2030. In recent years Aramco has discovered five new natural gas fields across the country, with the potential to produce a combined 100m cu feet per day, and it seeks to boost production of the fuel.
Expanding natural gas output has become a priority as the country looks to reduce the amount of hydrocarbons burned for power production, while also reaching net-zero emissions by 2060. In addition to power generation, natural gas can serve as cleaner feedstock for manufacturing and water desalination. Furthermore, Saudi Arabia aims to use the Jafurah gas field to produce energy from hydrogen, an emerging green industry estimated to be worth $700bn globally by 2050.
Administration
Riyadh is located in the Nejd region, a rocky plateau that covers a large swathe of land in central Saudi Arabia. Jeddah, meanwhile, is located on the Red Sea coast and is bordered by the Sarawat Mountains to the east. At the administrative level, the Kingdom is organised into 13 provinces, including the Eastern Province – which is home to the bulk of Saudi Arabia’s oil reserves – Riyadh Province, Makkah Province and Al Madinah Province. Each province has its own capital and are further divided into between three and 20 governorates, with a total of 118 throughout the country. Each of the governorates is organised into sub-governorates for greater local oversight.
Government
Saudi Arabia is a monarchy and the royal family is the Al Saud family, the direct descendants of King Abdulaziz, the country’s founder. The current monarch, King Salman bin Abdulaziz Al Saud, assumed the throne following the passing of his half-brother, King Abdullah bin Abdulaziz Al Saud, in January 2015. Since then King Salman has abolished a number of government councils, subsequently replacing them with two major councils: the Council for Political and Security Affairs, and the Council for Economic and Development Affairs, both of which are currently chaired by Crown Prince Mohammed bin Salman bin Abdulaziz Al Saud. In 2015 King Salman named Prince Mohammad bin Naif Al Saud crown prince, but he was relieved of the title in June 2017 and replaced by the then-Deputy Crown Prince Mohammed bin Salman, the son of King Salman.
Councils
The top government body in the Kingdom is the Council of Ministers, also known as the Cabinet, which is led by the ruler and consists of 30 royally appointed ministers serving four-year terms. The government’s relationship with, and its responsibilities towards, its citizens is codified by the Basic Law, which was passed by King Fahd in 1992.
The Majlis Ash-Shura, or Consultative Council, has an advisory role in the government and is made up of 150 members across 13 committees, all of whom are appointed by the king. However, the organisation has limited powers and cannot pass or enforce laws. The body broadly serves as a forum for policy debates, and it can interpret existing laws and propose new legislation to be passed by the ruler.
The council advises the king on a variety of issues, including the annual budget and long-term economic development plans. The Consultative Council also has the power to call ministers in for questioning. Around 70% of the members of the current council hold PhDs, many of which were granted from UK and US universities. Women make up one-fifth of the Consultative Council’s total membership.
While the body is primarily an advisory group, it has gained a substantial number of new powers over the past decade. For example, its mandate now includes participating in the Kingdom’s complex budgeting process, which was considered to be a significant increase in the council’s responsibility.
Succession
In 2006 a law formalising the succession process in the Kingdom was announced. Following the death of the reigning monarch, a committee composed of male heirs of King Abdulaziz will be convened to officially name the crown prince the new king. This law helped to facilitate a smooth transition in 2015, with the accession of then-Crown Prince Salman to the throne.
Power has traditionally been held by King Abdulaziz’s sons, with accession passing from brother to brother. The appointment of Prince Mohammed bin Salman as crown prince overturned decades of royal custom, as succession from father to son had only taken place once before in Saudi Arabia’s history.
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