Economic diversification and growth in Saudi Arabia: an ARDL analysis of vision 2030 impacts

Purpose This paper aims to investigate the impact of economic diversification on economic growth in Saudi Arabia, considering the country's Vision 2030 initiative. Design/methodology/approach The research utilizes time series data spanning from 1994 to 2023 and employs an autoregressive distributed lag (ARDL) model to analyze the relationship between economic diversification and economic growth. To measure economic diversification, the study uses two key indicators: the concentration index and the diversification index from UN Trade and Development (UNCTAD). Findings The short-run and long-run analyses reveal complex dynamics between diversification efforts and economic growth. The concentration index demonstrates a positive relationship with economic growth after two lagged periods, while the diversification index shows a negative effect on economic growth in both the short and long run. These results suggest that while concentration in certain areas may help growth in the short term, overall divergence from global economic trends may be hindering Saudi Arabia's economic development in the long run. Practical implications The study provides critical insights for policymakers, emphasizing the need for a balanced approach to diversification that aligns with global markets while leveraging local strengths. It also highlights the importance of targeted capital investment, workforce development and institutional reforms in supporting successful economic diversification. Originality/value This research contributes to the ongoing debate on economic diversification in resource-rich countries and offers a foundation for further exploration of sustainable economic development strategies in the context of Saudi Arabia's Vision 2030.