Dutch Disease in Saudi Arabia?

The aim of this study is to examine whether Saudi Arabia has suffered from Dutch Disease or not, and to examine how Saudi Arabia has managed symptoms related to Dutch Disease. Initially, the theory of Dutch Disease and different policy suggestions for Dutch Disease management are presented as a framework for the study. The results show that Saudi has depended heavily on its oil revenues and has experienced changes to its real effective exchange rate. Further, inflation was high in the early 1970s and the country suffered from an overheated labour market. These aspects are all symptoms of Dutch Disease. However, the manufacturing sector increased as well as agricultural production. More over, industrialization and infrastructure was developed through government support. These are results that are in contrast with the predictions of the Dutch Disease theory. The conclusion is that Saudi Arabia has suffered negative economic effects related to Dutch Disease symptoms. However, it has not suffered from Dutch Disease