Assessment of the Effects of Fiscal Policy on Economic Growth in Saudi Arabia

This study provides empirical analysis of the impact of fiscal policy on economic growth in Saudi Arabia. The study analysing time series data from 1980 to 2023. Augmented Dickey-Fuller and Philips perron unit root test was employed to establish the stationarity of the variables while the Autoregressive Distributed Lag (ARDL) model was used for testing for the existence of long-run and short-run equilibrium conditions. The findings suggested a co-integration between the dependent and independent variables as well as a long-term relationship between the variables in Saudi Arabia during the period studied. The estimation results reveal that adjusted R2 value of 0.8854 showed that about 89.5% of the total variation in the real GDP is explained by the independent variables included in the model. Specific fiscal policy variables that have significant and positive impact on economic growth in Saudi Arabia are government expenditure, terms of trade index, and real effective exchange and debt. In addition, the results of the study indicated that tax revenue, has a negative and significant impact on real GDP in Saudi Arabia during the period under review. Therefore, this study clearly suggests raising government expenditure must be a key part of any strategy to increase growth and trade reform has been strongly growth enhancing in S Saudi Arabian economy. while avoiding tax structures targeted explicitly at the country's low real GDP.