Oil exports have accounted for a major share of Saudi Arabia's total exports for decades and contributed to strengthening the Kingdom's socio-economic development. The diversification of exports has become an important topic for all oil-based economies, including Saudi Arabia. The Kingdom launched Saudi Vision 2030 in 2016, a reform plan that aims to diversify the country's economic resources. Through the Vision, the Kingdom aims to diversify non-oil exports and increase its share in the non-oil GDP from 16% to 50% in 2030. Non-oil exports are an important component of Saudi Arabia's economic diversification, as they can play crucial roles in sustainable economic development and job creation. Diversification of the non-oil exports will contribute to Saudi Arabia's economic development by reducing exports revenues' instability, minimizing exposure to the volatility and uncertainty, increasing private sector employment opportunities, attracting foreign direct investments that can contribute to productivity and efficiency growth in the entire economy through technology transfers and its positive spillover effects. To explore the various aspects of this transformation, the King Abdullah Petroleum Studies and Research Center (KAPSARC) published a new study entitled "Saudi Non-oil Exports before and after COVID-19: Historical Impacts of Determinants and Scenario Analysis." It explores the determinants of non-oil exports in the Kingdom in the long- and short-run. The study aims to help inform the policymaking process by developing cutting-edge a modeling framework for non-oil exports, and by providing outlooks and insights until 2030. The study used the KAPSARC Global Energy Macroeconometric Model (KGEMM) in the simulations. The KGEMM is a policy tool that assesses the impacts of internally made decisions by Saudi policymakers and changes in the global economy including energy markets on the Saudi Arabia's energy-macroeconomic environment. The study discusses that oil's share in Saudi Arabia's total GDP has gradually declined from 65% in 1991 to 42% in 2019. Correspondingly, the share of private sector economic activity in the total GDP has increased from 20% in 1991 to 41% in 2019. The research found that income of trading partners, domestic production capacity of the Saudi economy, real effective exchange rate, a measure of competitiveness, are the main determinants of Saudi non-oil exports. It also found the evidence of the export-led growth concept for Saudi Arabia. The model simulations till 2030 revealed that infrastructure elements such as finance, insurance, other business services, transport and communication alongside non-oil manufacturing and agriculture will be important in improving Saudi Arabia's non-oil export performance in the coming decade. The study concludes that policymakers may wish to consider that the non-oil sector (both tradable and non-tradable) promotes non-oil exports. In particular, the authorities may wish to note that non-oil manufacturing can boost non-oil exports more than agriculture can do. — SG
