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WEEKLY NEWSLETTER
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Saudi Arabia
Index
During the first half of the 1980s, Saudi Arabia had
substantial trade surpluses, but these were reduced in the period
of low oil prices after 1986. After the Iraqi invasion of Kuwait
and following the sharp increase in prices, the trade balance
swelled to between US$23 billion and US$24 billion. In contrast,
the services sector of the current account registered large
deficits. Service receipts, consisting of freight and insurance
connected with merchandise exports and investment income, fell in
accordance with decreases in the volume of oil exports and the
depletion of foreign assets. Service payments have been a major
burden on the current account. Whereas freight, insurance, and
tourism receipts remained stagnant or fell during the 1980s,
government military equipment purchases and public and private
transfers (both aid flows and workers' remittances) did not
contract sufficiently to erase the services and transfers
deficit. Between 1984 and 1988, oil revenue declines forced the
authorities to restrict government purchases of military
equipment, which helped cover the deficit on services. However,
after 1989, particularly after Operation Desert Shield, this
category, in addition to the outflow of workers' remittances,
aggravated the services' deficit to levels not seen since the
early 1980s. The services and transfers deficit rose from US$11.9
billion in 1988 to US$26.9 billion in 1990. As a result of these
trade and services flows, the current account has remained
persistently in deficit since 1986, although considerable
progress was made up to 1988 in reducing the shortfall. Despite a
sharply higher trade surplus in 1991, it was estimated that
payments to foreign allies, greater arms purchases, and increases
in remittances caused the current account deficit to balloon to
US$24 billion in 1991. By 1992, with the normalization of the
military situation, the current account deficit was estimated to
return to levels more in line with the structural deficit of the
economy.
Data as of December 1992
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