THE ROLE OF THE WATER SECTOR IN PROMOTING NON-OIL ECONOMIC GROWTH IN SAUDI ARABIA: AN ECONOMETRIC ANALYSIS USING THE NONLINEAR AUTOREGRESSIVE DISTRIBUTED LAG MODEL

This research investigates the asymmetric relationship between water-sector development and real non-oil output in Saudi Arabia by employing the nonlinear autoregressive distributed lag (NARDL) methodology. The analysis utilizes annual macroeconomic and water production data from 1990 to 2025; however, the primary estimation is conducted utilizing data from 2000 to 2025. The data set used for this analysis includes both official observations as well as documented historical calibrations and extensions. Additionally, augmented Dickey-Fuller tests and structural break analyses are performed to exclude I(2) processes. When controlling for capital formation, the bounds statistic reported for the model specification is 9.031 and the error-correction coefficient reported is −0.5406, which translates into an approximate annual adjustment rate of 54.1%. For positive changes in SWCC desalinated production, the long-run elasticity coefficient estimated for this relationship is 0.1747; whereas for negative partial sums, the coefficient reported is −0.7075. Therefore, long-run symmetry is rejected (Wald F = 14.021). On the other hand, short-run symmetry is not rejected. Overall, these results suggest that the expansion of dependable water services and capital accumulation are associated with non-oil economic development in Saudi Arabia. However, causal interpretation remains constrained by reconstructed observations, relatively few contraction episodes, and potential reverse causality. Therefore, policymakers should consider coordinating desalination activities, distribution efficiency improvements and wastewater reuse programs with diversification investment strategies.