The Impact of Digital Economy on Green Growth in the Kingdom of Saudi Arabia

Abstract In the background of the rapid development of the digital economy, Saudi Arabia is facing an imperative necessity to transition to green and sustainable growth from traditional growth patterns, as per its Vision 2030 ambitions. This study examines how the digital economy impacts green growth in Saudi Arabia during 1996–2022, addressing both environmental sustainability and inclusive development. The study uses reliable data from international sources such as the OECD, WDI, and Heritage.org, and applies cointegration tests along with Bayesian methods to estimate a vector autoregression model (BVAR) to investigate the relationships between digitalization (DESI), trade, corruption, and population growth in relation to green growth. The empirical findings strongly support the hypothesis that digitalization significantly contributes to green growth in the long term, primarily by inducing structural transformation and greater sustainability. DESI emerges as a strong and growing determinant, explaining 14.24% of variation in green growth in the long run—just after trade. Historical decomposition also highlights that the positive impact of digitalization was most prominent between 2005 and 2015, matching a global digital shift. The analysis also gives interpretative proof of the role of the digital economy in inclusive green growth as better governance and less corruption appear to mediate this relationship. The evidence confirms that while digitalization has giant potential to drive green growth, the success will lie in mainstreaming sustainability in digital policy, green investment in technology, and the alignment of trade and labour policies with green priorities. Policymakers should ensure that digital transformation is accompanied by proper institutional reforms and inclusive planning to realize an equitable and sustainable green transformation in Vision 2030.