Saudi Arabia is pulling off an astonishing transformation – The Economist – 08.05.25
- Michael Julien
- 19 hours ago
- 4 min read
Muhammad bin Salman is going from troublemaker to peacemaker.
WHEN DONALD TRUMP lands in Saudi Arabia on May 13th for the opening state visit of his second term in office—a reprise of his very first state visit eight years ago—you should pause for a moment to take in just how unexpectedly the situation has changed. Mr Trump has become wilder and more autocratic. By contrast, his host, the crown prince and de facto Saudi ruler, Muhammad bin Salman (MBS), has transformed his country into a force for order.
The familiar image Saudi Arabia conjures up is not just of fabulous riches but also of political repression and the subjugation of women. The kingdom has exported religious extremism, and thereby shares responsibility for the terrorism and violence that this has fomented. Today the country is still an autocracy. Its crown prince does not tolerate dissent. However, the Saudi Arabia you used to know no longer exists.
The kingdom is now a stabilising influence in the Middle East. At home it has undergone a stunning social revolution that has few parallels. The pressing question is over the third part of Saudi Arabia’s transformation, from a petrostate into a globalised, 21st-century economy. Here change has begun, but it is not fast enough—with potentially grave consequences for MBS’s entire project of reform.
The most surprising attribute of the new Saudi Arabia is its constructive role in world politics. The kingdom has both oil wealth and a hefty population. That clout once made it a menace. It was a financier and exporter of jihadism. In 2015, after his father, King Salman, ascended the throne, mbs began a disastrous war in Yemen against the Houthis. In 2018 came the shocking murder of Jamal Khashoggi, a journalist and dissident, on the orders of the Saudi regime.
The stain of those disgraces remains, but Saudi Arabia’s recent actions count for something, too. It no longer sponsors terrorism. It now counsels other countries to wind down their conflict with the Houthis. It has helped Syria’s new government by paying some of its debts to the World Bank, and promising to invest in the country if American sanctions are lifted.
Saudi Arabia’s influence in the region and with Mr Trump means that MBS could yet do more. His country has already hosted talks aimed at bringing a ceasefire to Ukraine. He advises dealmaking with Iran and an end to the war in Gaza. America’s president might just listen.
One reason for believing in Saudi Arabia’s foreign-policy rethink is that it furthers mbs’s central concern, which is to bring about bold social and economic change at home. He needs those changes because oil revenues cannot be counted on to sustain Saudi Arabia for ever. If young Saudis, who are two-thirds of the native population, are to thrive and, in the long run, to sustain the House of Saud in power, they need jobs. An unstable neighbourhood is a headache, because it inflames Saudis at home and raises the risk premium foreign investors attach to the country. A flourishing Middle East, by contrast, would mean more customers for the products Saudi Arabia hopes to make, and for its glittering new tourist resorts.
Social change is the second component of MBS’s new contract with his people, and it has been nothing short of extraordinary. Less than a decade ago half the country’s population—its women—were shut out of public life and much of the labour market. Cinemas and concerts were banned. Any fun was had indoors, in the desert or abroad, away from the eyes of the religious police. Today women are free to travel, work and live where they like. The vice squad has been disbanded. Like the rest of the world, Saudis can now watch rock stars on stage and superheroes on the silver screen. Even in conservative parts of the country crowds of young people are out and about, revelling in their new freedoms.
The area where Saudi Arabia’s reinvention remains incomplete is the economy. Since 2016 the government has spent heavily in order to diversify away from oil. The main targets have been gaudy “giga-projects”—such as the futuristic city of NEOM and a giant cube the size of 20 Empire State buildings—which by 2030 were projected to gobble up nearly $900bn. To cultivate new industries, the sovereign-wealth fund has backed more than 100 firms in areas from electric vehicles and e-sports to coffee-making and chip manufacturing.
Despite this, the economy remains stubbornly oily. About 60% of the government’s revenues still comes from selling crude. Although the hospitality and leisure industry is thriving, the flood of money being channelled into public spending is raising costs and crowding out private enterprise. Foreign investors are not yet excited about Saudi Arabia.
Worse, the fiscal strain is growing. Oil prices are at $61 a barrel, well below the $92 that the imf reckons the kingdom needs to balance the books. The country’s debt stock, though low, has doubled as a share of gdp since 2016. Although Saudi Arabia has got off with a so-called “reciprocal” tariff of just 10%, Mr Trump’s trade war will only worsen the strain. If the world economy slows, then oil prices and foreign investment could sink further.
No more white camels
To truly transform the economy, mbs must seize the chance to curb vanity projects that offer scant hope of a return. The government could retrench from areas such as tech, where private firms may invest. Improving areas where they will not, such as education and enhancing the business environment, would do more for long-term growth. A new investment law is welcome, but businesses remain unsure that their rights will be upheld, especially if they clash with the government.
The stakes for MBS and his country are high. Social liberalisation has bought him time among a youthful population. However, if economic change stalls and Saudis’ livelihoods suffer, their goodwill could easily dissipate. Unrest at home could lead the government to crack down, undoing the progress the kingdom has made. Saudi Arabia has come a long way in just a few years. It still has far to go. ■
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image: Peter Crowther/Getty Images
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