Current social and economic challenges in Saudi Arabia

Saudi Arabia is on the verge of Vision 2030 faces considerable structural challenges in terms of both economic diversification and social change. The kingdom is in a critical transition phase between its traditional oil dependency and a diversified future economy.

Economic challenges

Worsening of the budget crisis

Saudi Arabia is experiencing a dramatic deterioration in its public finances. In the first quarter of 2025, the Kingdom recorded a budget deficit of 58.7 billion Saudi riyals (15.7 billion US dollars) - the highest since 2021^1. After just three months, Saudi Arabia had already reached more than half of the projected deficit of 101 billion riyals for the whole of 2025^1.

The Oil revenues fell drastically by 17.65 percent to 149.81 billion riyals compared to the previous year, mainly due to OPEC+ production cuts^1. Goldman Sachs warns that if oil prices remain low, the deficit could rise to 67 billion US dollars - more than double the government's original forecast^3.

Critical oil price dependency

Saudi Arabia needs a Oil price of over 90 US dollars per barrelto balance its budget^5. In fact, the break-even point is over USD 100 if Public Investment Fund (PIF) spending on megaprojects is included^6. In fact, the average oil price in the first quarter of 2025 was only USD 61^5.

This discrepancy forces the kingdom to massive borrowing. Total debt rose to 1.22 trillion riyals (26.2 percent of GDP) in 2024^7and analysts expect that Saudi Arabia will have to issue at least another 10 billion US dollars in bonds^9.

Problematic megaprojects

The flagship project NEOM is turning into a financial disaster. According to an internal audit, the total costs could reach astronomical levels by 2080. 8.8 trillion US dollars increase - more than 25 times the annual Saudi Arabian budget^10. Over 50 billion US dollars have already been invested without substantial results^10.

The Linethe heart of NEOM, had to be drastically scaled down: from the originally planned length of 170 kilometers to just 2.4 kilometers - a reduction of 98.6 percent^12. The project suffers from inadequate infrastructure, labor shortages and a lack of power supply^10.

Real estate crisis and inflation

Saudi Arabia is experiencing a Dramatic explosion in real estate priceswhich contributes to social inequality. In Riyadh, housing prices rose by almost 11 percent to around USD 1,500 per square meter in 2024^14. Residential rents rose by 9.7 percent nationwide, with villa rents increasing by 7.7 percent^15.

These Housing crisis drives inflation to 2.3 percent, with housing costs accounting for 25.5 percent of the consumer price index^17. Many first-time buyers are excluded from the market Demand from first-time buyers fell from 40 percent in 2023 to just 29 percent in 2024^14.

Social challenges

Unemployment and skills shortage

Despite improvements, the Youth unemployment critical. Among 15-24-year-olds, it is 13.77 percent^18which is well above the global average. A study by Korn Ferry predicts a skills shortage of 663,000 qualified workers by 2030^20.

The "Salaria Wars" amplify the problem: Fresh graduates in the private sector saw their salaries rise by 30 percent, with some receiving offers of 60 percent higher salaries^20. This leads to considerable costs for companies and destabilizes the labor market.

Persistent women's rights problems

Although Saudi Arabia has introduced reforms, women remain systematically discriminated against. The Personal Status Act passed in 2022 continues to codify the male guardianship system and restricts women in marriage, divorce and custody matters^21.

The Female unemployment is 14.2 percent, significantly higher than for men at 4.2 percent^23. Despite the rising employment rate of women (35.8 percent), it remains 30 percentage points below that of men^24.

Human rights violations

Migrant workersespecially domestic workers, are subject to severe exploitation. Amnesty International has documented systematic abuse of Kenyan domestic workers, who are forced to work more than 16 hours a day, have no days off and have their passports confiscated^25.

The Kafala system makes migrant workers extremely dependent on their employers and fosters systematic racism^25. Around 4 million people work as domestic workers in Saudi Arabia, all of them migrant workers^25.

Social tensions

The rapid social changes under Crown Prince Mohammed bin Salman create social tensions. While the government promotes entertainment and nightlife to keep the youth^27the political system remains authoritarian.

Human rights defenders continue to be persecuted, arbitrarily arrested and sentenced to long prison terms^26. The authorities strictly monitor social media and arrest people for critical statements^28.

Structural problems of Vision 2030

Financing gap

The Vision 2030 is struggling with massive financing problems. The Public Investment Fund (PIF) saw its profits plummet by 60 percent to just USD 6.9 billion in 2024^29. Foreign direct investment only reaches 33 billion US dollars a year instead of the target of 100 billion^30.

Dependence on government spending

The Economic diversification remains strongly state-driven. The construction industry would hardly have grown without government megaprojects^31. Private companies report extended payment cycles for government contracts, leading to liquidity problems^32.

Productivity problems

Saudi Arabia suffers from lack of productivity growthwhich threatens the diversification agenda^24. The population's traditional subsidy mentality is making the transition to a performance-based economy more difficult^33.

International challenges

Reputational risks

Saudi Arabia Human rights balance sheet discourages international investors. The country continues to carry out death sentences for drug offenses and does not tolerate political opposition^26. Saudi Arabia's appointment as chair of the UN Commission on the Status of Women 2025 caused international outrage^34.

Regional instability

The geopolitical tensions with Iran are a burden on the economy. The Strait of Hormuz, through which a fifth of the world's crude oil is transported, remains a strategic risk^5. A blockade could drive oil prices to 100-150 US dollars^5.

Conclusion

Saudi Arabia is facing a critical turning point. While Vision 2030 shows progress in some areas, massive budget deficits, failed megaprojects and persistent social problems threaten the economic transformation. The Kingdom needs to drastically rethink its spending and implement real structural reforms to achieve its ambitious goals while ensuring social stability.

Supplementary assessment from a Gradido perspective

The compilation impressively sums up the complex interdependencies between economic transformation, social change and the country's many areas of tension.

What the analysis means for us

1. depth & complexity:
The text makes it clear that it is not enough to simply collect "superficial" facts. The social, economic and cultural challenges are closely interwoven - and require learning with and from one another at eye level.

2 The kingdom at a crossroads:
Saudi Arabia is experiencing a historic balancing act: between modernization and tradition, between gigantic investments and budgetary risks, between social awakening and authoritarian control. This ambivalence is both a challenge and an opportunity.

3. space for Gradido:
This "threshold time" in particular is perfect for Gradido's strengths:

• Securing livelihoods and participation for all groups

• Bridge building between cultural values (e.g. Zakat) and economic innovation

• Encouraging genuine diversification - not only economically, but also socially and ethically

• Soft factors such as reconciliation, dignity, community can be particularly modeled here

4. potential for inspiration:
The presentation reveals where the true roots of the problems lie - and where Gradido can bring about real healing, innovation and global inspiration as part of Vision 2030.