Fiscal Resilience in Times of Crisis: The Impact of Government Consumption Alongside Oil and Non-Oil Revenues on Saudi Arabia’s GDP Growth

Abstract

This study investigates the impact of General Government Final Consumption Expenditure (GC) on GDP growth in Saudi Arabia during major economic crises from 1990 to 2022, focusing on periods marked by fluctuations in oil and non-oil revenues. By integrating these revenue streams, the research provides a more comprehensive analysis of fiscal policy effectiveness during economic downturns. Using an Autoregressive Distributed Lag (ARDL) model, the study reveals that Government Consumption significantly stabilizes and stimulates the Saudi economy amidst revenue volatility. Key findings highlight the dual role of Government Consumption (GC) as both a buffer against immediate economic shocks and a stimulus for economic recovery. The study contributes to the discourse on fiscal policy in oil-dependent economies by demonstrating the critical role of diversified revenue strategies in enhancing economic resilience. Recommendations are offered for policymakers to optimize fiscal strategies, ensuring robust economic recovery and long-term stability in volatile markets. This research underscores the necessity for Saudi Arabia to refine its fiscal policies towards greater economic diversification and stability.