The Impacts of Fuel Exports on Sustainable Economic Growth

Abstract

Identifying pathways relevant for achieving sustainable economic growth has been established as a major macroeconomic agenda for Saudi Arabia. Since this Arab nation is the largest crude oil exporter in the world, fuel export revenues can be assumed to substantially contribute to the growth of its economy. On the other hand, Saudi Arabia is also considered a natural disaster-prone country whereby further degradation of the environment can possibly limit the nation’s prospects of achieving economic growth sustainability. Hence, this study aims to assess the impacts of fuel exports, environmental pollution, capital formation, and labor force expansion on economic growth in Saudi Arabia during the 1969–2020 period. It contributes to the literature by innovatively investigating the independent as well as the joint impacts of fuel exports and environmental pollution on Saudi Arabia’s economic growth performances. Furthermore, an additional literature gap is addressed by predicting the growth response paths concerning both positive and negative shocks to the levels of the potential economic growth facilitators considered in this study. Overall, the regression findings reveal that higher levels of fuel exports, capital formation, and expanision in the labor force size boost economic growth in Saudi Arabia in the long run. In contrast, greater carbon dioxide emissions-related environmental pollution is witnessed to dampen the nation’s long-run growth level. Interestingly, fuel exports and environmental pollution are jointly evidenced to exert long-run growth-inhibiting impacts as well. Moreover, the regression outcomes also appear to be robust when ecological footprints are considered as an alternative indicator of environmental pollution. Finally, the causality estimates support the regression findings by exposing the existence of unidirectional causal influences of fuel exports, environmental pollution, capital formation, and labor force participation on the economic growth figures of Saudi Arabia. Therefore, considering these results, several sustainable growth-facilitating policies are suggested.