Name: Saudi Arabia's Economy Is Collapsing, And Its Far Worse Than You Expect
Uploaded: 2025-08-04T18:34:36.000Z
Duration: 10 min 33 s
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After the president of the United States visited Saudi Arabia, the Saudis announced that they will be investing in the United States 600 billion dollars and they will be purchasing a 142 billion dollars worth of American equipment.

While 600 billion dollars is not a lot of money if you compare it to the size of the US economy, it is still a substantial sum.

It can create hundreds of thousands of jobs and provide the stock market with a meaningful boost.

But the more pressing question is that what is the state of the Saudi economy?

Can they actually afford 600 billion dollar investment in a foreign country?

To be frank, the Saudi economy has been stagnating for the last 10 years. 50 years ago, Saudi Arabia has been a barren desert with little to no infrastructure.

And since then, the country has made remarkable progress.

But unlike its neighbors such as the UAE that could successfully diversify its economy, Saudi Arabia overwhelmingly remains reliant on oil.

Almost 75% of government's revenue still depend on oil sales.

And the remaining 25% still tied largely to the oil ecosystem.

And as the global economy decisively moves away from fossil fuels, Saudi Arabia finds itself standing on increasingly unstable grounds.

So let's break it down and figure out what exactly is happening.

Oil still remains the cornerstone of the Saudi government.

And as oil prices begin to foil, the structure of the economy starts to shake.

In response to that, the Saudi government introduced Vision 2030, an ambitious blueprint project to diversify the Saudi economy and transform it from an oil-dependent country to a sustainable diversified economy.

At the heart of this vision is a 500 billion-dollar megacity, which is going to be 170 kilometers, car-free, carbon-neutral, powered by clean energy that will foster innovation, artificial intelligence, and tourism.

There is going to be also the Red Sea project, a combination of 90 luxurious islands on the Red Sea, which will host the Winter Olympics somewhere in the desert.

I didn't think that I will live to the age where the Winter Games will ever take place in the middle of the desert.

All of this sounds visionary, but these projects will take decades to build in the first place.

They even cut already the NEON project from 170 kilometers down to a little over 2 kilometers.

And they will take decades to break even, leave alone for them to become the main source of the government's funding.

And here are the three fundamental reasons why the Saudi economy is suffering and why the country will not even have the money to invest in its own projects, leave alone investing 600 billion dollars in the United States.

Saudi Arabia continues to spend as if oil prices are above 100 dollars per barrel.

But if you look at oil prices, over the last decade, they have averaged to around 60 dollars per barrel and it's trending downward.

One of the fundamental goals of President Trump's visit to the Middle East was to persuade the Saudis to boost production that will push prices even further down.

Will the Saudi government increase to production at their own expense in order to satisfy the President of the United States but hurt their own country?

Let's face it, the era of 100 dollars per barrel of oil is over.

Transportation, which is the largest consumer of oil, is moving into EVs.

Just in China alone, last year, 50% of all the new cars that have been sold in the country have been EVs, and the rest of the world is moving in the exact same direction and 5 years from now, that will be the case pretty much in every advanced country.

If Saudi Arabia is struggling with budgetary pressures, how they will even get the 600 billion dollars to invest in the United States.

Meanwhile, Donald Trump signaled his willingness to strike a deal with Iran and Russia, which are some of the largest exporters of oil.

And those deals could result in lifted sanctions on those countries, which will allow them to throw their oil into the market, which will again lead to lower oil prices because of higher supply.

This only compounds the uncertainty with Saudi Arabia.

At this level of spending, Saudi Arabia's economic model looks increasingly unsustainable.

Saudi Arabia can still increase their production by 3 to 4 million extra barrels per day, but that will push other exporters of oil to increase their production, which is going to lead to an oversupply of the market, which will further lower down prices.

So that extra income the government is going to make is going to be insignificant, especially if you compare it to the current spending of the Saudi government.

The second problem is, the Saudi sovereign fund isn't as big as it seems.

Yes, on paper, the Saudi or the public investment fund of Saudi Arabia has assets valued at around a trillion dollars, and that's a formidable source, but if you dig into the numbers, it's not as much as it seems.

As they say, the devil is in the details, that's where you actually find the real problems.

The public investment fund has 16% of Aramco, which is a state-owned corporation by Saudi Arabia that sells the Saudi oil, and that is valued at 250 billion dollars.

The public investment fund also holds almost 70% of the largest mining company in Saudi Arabia, which is valued at around 130 billion dollars.

The public investment fund also holds the Saudi National Bank, valued at 55 billion dollars.

So most of the assets at the public investment fund are already state-owned corporations, which means that they cannot be sold, they cannot be traded in the stock market, and it's very difficult to invest them or sell those shares to foreign investors.

And the only real investments that the public investment fund has are worth at around 25 billion dollars.

These are investments in the US stock market or other stock markets across the globe that the public investment fund can easily convert into cash.

According to different estimates, the Saudi public investment fund also has anything between 15 to 20 billion dollars of cash or cash equivalent assets, which means that the real power of the public investment fund isn't a trillion dollars, but it's somewhere between or around 50 billion dollars.

While 50 billion dollars is a lot of money, it's simply a fraction of what they promise to invest in the United States.

To invest beyond that means the Saudis will have to sell the national assets of the country, which is a politically sensitive process.

And for global investors, it's much easier for them to invest in a transparent stable economy, such as the United States, rather than gamble on Saudi Arabia.

The third problem is, the kingdom of Saudi Arabia is getting addicted to debt.

The debt-to-GDP ratio in Saudi Arabia is 30%, which is, frankly speaking, very low compared to many European countries and especially to the United States, where the debt-to-GDP ratio is around 130%.

But this comparison is deeply misleading.

Unlike Saudi Arabia, the United States boasts a vast and diversified economy with 130 million taxpayers, so even if the United States will stop selling oil, it can easily sustain its debt.

European economies, even though they have been behind the United States lately, especially in the last 20 years, they still rely on services, manufacturing, and high-tech industries, which allows them to sustain that kind of debt.

Compare that to Saudi Arabia, where 75% of the entire budget comes from selling oil and gas.

They don't have income tax, but they have value-added tax and they have a corporate tax rate.

And value-added tax is very similar to a sales tax but it happens at every stage of the production.

But if oil prices go down, which is the engine of the economy, less transactions will start taking place within the entire economy and that 15% value-added tax, which is already insignificant to the government's budget, will become almost zero.

The second, which is the corporate tax rate that stands at 20%, the foreign cooperation only exists in Saudi Arabia because there is so much oil in the country.

Oil prices go down and these foreign corporations will have nothing to do in Saudi Arabia.

The bottom line is that Saudi Arabia is living beyond its means.

And as oil revenues keep declining, it's leading the Saudi government to rely on borrowing.

And that reliance could lead to a debt spiral, an economic hole that the kingdom might not survive.

If the Kingdom of Saudi Arabia over the last 50 years at least invested 20% of their oil the stock market of the United States, they would have today an asset worth over 10 trillion dollars that would have brought the kingdom anything between 7 to 10 percent or 700 billion dollars up to a trillion dollars annually, which is twice the size of the current budget of Saudi Arabia, and they would be financially independent and wouldn't have the problems that they have today.

So if you don't want to end up like Saudi Arabia, start investing as early as possible.

And if you wanna know what is the best investing strategy for you, then there is a link in the description of this video that will help you out.

Maybe you should send this video to the crown prince of Saudi Arabia to watch this video and also use the link in the description of this video.

It might help the Saudi government to build an investing strategy that will help them to finally become financially independent.

It might be a little too late for the Saudi government, but it's never too late for you.