Economic policy advisor to the Saudi government

You are an economic policy advisor to the Saudi government. Imagine the oil price will keep declining for the next 5 years (until 2025). Let’s assume that the average oil price will be $30 with average production of 10 million barrels daily for the next 5 years. Each year starting from the next year will have different government expenditure while the oil revenue will be the same for the 5 years. As an economist, you need to think how this shock can affect the whole economic growth for the next 5 years including: 1) the fiscal sector, 2) inflation (domestic prices) and unemployment, 3) monetary and financial sector, 4) external sector (Balance of Payments), 5) the exchange rate, 6) and the social reaction in general after all the negative or positive impacts.

You need to write a policy note/analysis discussing the 6 macroeconomic elements in order to propose a certain policy direction that the Saudi government needs to take. Please include supportive graphs and tables to deliver a clear message. Please cite your work.

 

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