Coursework for MBA
ARAMCO 2022
Global Macroeconomics
Alex Michaelides
In 2003 two analysts at Goldman Sachs wrote a research report coining the term
“BRICs”. These were the main conclusions from the Report:
Over the next 50 years, Brazil, Russia, India and China—the BRICs economies—could
ecome a much larger force in the world economy. Using the latest demographic projections
and a model of capital accumulation and productivity growth, we map out GDP growth,
income per capita and cu
ency movements in the BRICs economies until 2050.
The results are startling. If things go right, in less than 40 years, the BRICs economies
together could be larger than the G6 in US dollar terms. By2025 they could account for over
half the size of the G6. Cu
ently they are worth less than 15%. Of the cu
ent G6, only the
US and Japan may be among the six largest economies in US dollar terms in 2050.
About two-thirds of the increase in US dollar GDP from the BRICs should come from higher
eal growth, with the balance through cu
ency appreciation. The BRICs’ real exchange
ates could appreciate by up to 300% over the next 50 years (an average of 2.5% a year).
Your task is to replicate this analysis for KSA for the next 20 years. It is best to
eak up the analysis in two parts, at first ignoring cu
ency appreciation issues
and then adding real exchange rate appreciation as well.
There are a number of issues you need to discuss/think about. A key issue for
KSA is the non-oil GDP, that is the part that needs to catch up to other
economies. A second issue is the potential transition to renewables in KSA and
the rest of the world. How might that transition affect KSA?
You are asked by the ministry of finance to prepare a written response that is
no greater than 5 pages (excluding diagrams and figures) and an EXCEL
spreadsheet illustrating your calculations. You can refer to any number of
diagrams or calculations in the EXCEL spreadsheet in your writeup.
Cu
ent prices
Expenditure on Gross Domestic Product at Cu
ent Prices
(Million Of Saudi Riyals)
1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021*
1- Gross Final Consumption Expenditure 11,704 12,885 14,631 19,180 31,173 51,006 76,267 116,487 152,789 199,644 224,071 287,469 328,508 334,080 328,275 320,315 288,607 284,193 278,267 303,100 331,955 386,717 379,474 368,725 363,029 376,203 404,269 423,223 406,610 406,311 440,899 446,557 447,957 474,483 516,652 586,804 678,442 756,273 869,045 948,829 1,039,590 1,169,823 1,336,583 1,467,257 1,649,013 1,724,946 1,660,089 1,694,622 1,859,511 1,884,537 1,901,320 2,060,917
a) Govt. Final Consumption Expenditure 3,837 4,300 5,098 7,844 13,593 23,908 38,076 47,921 66,217 81,404 86,981 121,864 137,555 132,834 127,048 120,051 111,633 113,040 102,240 119,958 127,824 169,128 152,692 130,976 122,552 125,923 144,783 161,795 155,192 154,095 183,804 188,695 184,517 198,148 221,798 262,650 311,082 322,086 345,098 357,015 400,173 488,062 551,179 628,522 739,156 736,139 624,632 630,978 736,234 721,283 761,122 763,741
b) Private Final Consumption Expenditure 7,867 8,585 9,533 11,336 17,579 27,098 38,190 68,567 86,572 118,240 137,089 165,605 190,952 201,245 201,226 200,264 176,974 171,154 176,027 183,142 204,131 217,589 226,782 237,749 240,477 250,280 259,486 261,428 251,418 252,216 257,095 257,862 263,440 276,335 294,854 324,154 367,360 434,187 523,947 591,814 639,417 681,761 785,404 838,735 909,857 988,807 1,035,457 1,063,644 1,123,277 1,163,254 1,140,198 1,297,176
2- Gross Fixed Capital Formation 3,069 3,515 4,892 7,745 14,242 28,617 48,358 66,767 81,836 93,680 113,438 132,262 130,767 120,238 106,050 83,873 72,695 71,660 62,556 66,392 83,251 100,480 103,955 108,824 93,002 103,316 102,848 109,241 112,959 118,196 123,324 126,095 128,066 148,098 185,872 237,691 288,680 368,687 444,499 414,452 483,921 568,793 614,906 662,455 714,253 732,432 631,838 632,232 646,871 664,690 617,582 737,658
a) Private 60,946 76,753 87,006 93,061 80,420 90,105 89,934 93,139 100,522 105,238 106,971 108,587 109,945 124,807 155,486 182,751 229,939 284,645 334,617 302,364 322,730 350,849 367,975 412,777 449,791 462,083 437,971 456,722 467,682 502,458 463,707 637,985
b) Public 22,305 23,727 16,949 15,763 12,582 13,211 12,914 16,102 12,437 12,958 16,353 17,508 18,121 23,291 30,386 54,940 58,741 84,042 109,882 112,088 161,191 217,944 246,931 249,678 264,462 270,349 193,867 175,510 179,188 162,232 153,875 99,673
3- Domestic Final Demand 14,772 16,400 19,523 26,925 45,415 79,623 124,625 183,255 234,625 293,324 337,509 419,731 459,274 454,318 434,325 404,188 361,302 355,853 340,822 369,493 415,206 487,198 483,429 477,549 456,032 479,519 507,117 532,464 519,569 524,507 564,223 572,652 576,023 622,581 702,525 824,495 967,122 1,124,960 1,313,544 1,363,281 1,523,511 1,738,616 1,951,488 2,129,712 2,363,266 2,457,378 2,291,927 2,326,855 2,506,381 2,549,227 2,518,903 2,798,575
4- Change in Stock 2,351 4,210 3,183 -15,172 35,623 8 21,156 13,254 17,183 5,124 11,964 -363 5,050 33,064 32,342 -3,141 -10,032 -14,797 2,518 3,039 -14,158 -1,516 13,939 15,941 10,051 5,584 7,501 7,468 13,356 12,271 13,958 9,406 11,958 9,651 6,871 10,615 24,885 43,980 87,561 95,884 128,660 110,103 117,616 78,678 101,204 105,996 116,270 112,777 160,812 213,387 111,098 1,441
5- Exports of Goods & Services 12,293 17,403 24,668 55,240 101,463 120,656 134,953 150,167 134,571 206,226 347,345 391,591 266,511 171,681 145,530 113,163 85,989 99,045 103,531 120,494 177,685 189,694 200,772 171,065 172,123 200,437 237,812 243,384 163,099 210,231 308,473 273,677 291,155 371,088 494,702 702,164 844,522 934,321 1,210,701 757,711 981,867 1,410,841 1,497,824 1,453,665 1,329,530 817,539 753,225 899,975 1,180,937 1,071,975 690,608 1,086,807
6- Imports of Goods & Services 5,218 5,776 7,319 11,588 21,284 35,757 54,794 85,154 113,508 128,736 149,437 187,591 205,502 212,775 190,639 137,892 115,239 119,170 116,352 135,961 138,207 180,199 184,746 166,590 131,976 148,720 158,239 161,782 145,616 140,570 175,973 165,219 168,114 194,041 233,814 306,503 425,038 544,434 662,568 607,759 653,261 742,414 807,023 862,128 957,686 927,402 742,913 757,409 785,960 821,028 682,979 761,044
Gross Domestic Product 24,198 32,237 40,056 55,404 161,216 164,530 225,940 261,521 272,871 375,938 547,381 623,367 525,334 446,288 421,558 376,318 322,020 320,931 330,519 357,065 440,526 495,177 513,394 497,965 506,230 536,820 594,191 621,534 550,408 606,439 710,681 690,516 711,022 809,279 970,283 1,230,771 1,411,491 1,558,827 1,949,238 1,609,117 1,980,777 2,517,146 2,759,906 2,799,927 2,836,314 2,453,512 2,418,509 2,582,198 3,062,170 3,013,561 2,637,629 3,125,780
* Preliminary Data
Annual Growth Rates of Expenditure on Gross Domestic Product at Cu
ent Prices
(%)
1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
1- Gross Final Consumption Expenditure 10.1 13.6 31.1 62.5 63.6 49.5 52.7 31.2 30.7 12.2 28.3 14.3 1.7 -1.7 -2.4 -9.9 -1.5 -2.1 8.9 9.5 16.5 -1.9 -2.8 -1.5 3.6 7.5 4.7 -3.9 -0.1 8.5 1.3 0.3 5.9 8.9 13.6 15.6 11.5 14.9 9.2 9.6 12.5 14.3 9.8 12.4 4.6 -3.8 2.1 9.7 1.3 0.9 8.4
a) Govt. Final Consumption Expenditure 12.1 18.6 53.9 73.3 75.9 59.3 25.9 38.2 22.9 6.9 40.1 12.9 -3.4 -4.4 -5.5 -7.0 1.3 -9.6 17.3 6.6 32.3 -9.7 -14.2 -6.4 2.8 15.0 11.7 -4.1 -0.7 19.3 2.7 -2.2 7.4 11.9 18.4 18.4 3.5 7.1 3.5 12.1 22.0 12.9 14.0 17.6 -0.4 -15.1 1.0 16.7 -2.0 5.5 0.3
b) Private Final Consumption Expenditure 9.1 11.0 18.9 55.1 54.1 40.9 79.5 26.3 36.6 15.9 20.8 15.3 5.4 -0.0 -0.5 -11.6 -3.3 2.8 4.0 11.5 6.6 4.2 4.8 1.1 4.1 3.7 0.7 -3.8 0.3 1.9 0.3 2.2 4.9 6.7 9.9 13.3 18.2 20.7 13.0 8.0 6.6 15.2 6.8 8.5 8.7 4.7 2.7 5.6 3.6 -2.0 13.8
2- Gross Fixed Capital Formation 14.6 39.2 58.3 83.9 100.9 69.0 38.1 22.6 14.5 21.1 16.6 -1.1 -8.1 -11.8 -20.9 -13.3 -1.4 -12.7 6.1 25.4 20.7 3.5 4.7 -14.5 11.1 -0.5 6.2 3.4 4.6 4.3 2.2 1.6 15.6 25.5 27.9 21.5 27.7 20.6 -6.8 16.8 17.5 8.1 7.7 7.8 2.5 -13.7 0.1 2.3 2.8 -7.1 19.4
a) Private 25.9 13.4 7.0 -13.6 12.0 -0.2 3.6 7.9 4.7 1.6 1.5 1.3 13.5 24.6 17.5 25.8 23.8 17.6 -9.6 6.7 8.7 4.9 12.2 9.0 2.7 -5.2 4.3 2.4 7.4 -7.7 0.0
b) Public 6.4 -28.6 -7.0 -20.2 5.0 -2.2 24.7 -22.8 4.2 26.2 7.1 3.5 28.5 30.5 80.8 6.9 43.1 30.7 2.0 43.8 35.2 13.3 1.1 5.9 2.2 -28.3 -9.5 2.1 -9.5 -5.2 0.0
3- Domestic Final Demand 11.0 19.0 37.9 68.7 75.3 56.5 47.0 28.0 25.0 15.1 24.4 9.4 -1.1 -4.4 -6.9 -10.6 -1.5 -4.2 8.4 12.4 17.3 -0.8 -1.2 -4.5 5.2 5.8 5.0 -2.4 1.0 7.6 1.5 0.6 8.1 12.8 17.4 17.3 16.3 16.8 3.8 11.8 14.1 12.2 9.1 11.0 4.0 -6.7 1.5 7.7 1.7 -1.2 11.1
4- Exports of Goods & Services 41.6 41.7 123.9 83.7 18.9 11.8 11.3 -10.4 53.2 68.4 12.7 -31.9 -35.6 -15.2 -22.2 -24.0 15.2 4.5 16.4 47.5 6.8 5.8 -14.8 0.6 16.4 18.6 2.3 -33.0 28.9 46.7 -11.3 6.4 27.5 33.3 41.9 20.3 10.6 29.6 -37.4 29.6 43.7 6.2 -2.9 -8.5 -38.5 -7.9 19.5 31.2 -9.2 -35.6 57.4
5- Imports of Goods & Services 10.7 26.7 58.3 83.7 68.0 53.2 55.4 33.3 13.4 16.1 25.5 9.5 3.5 -10.4 -27.7 -16.4 3.4 -2.4 16.9 1.7 30.4 2.5 -9.8 -20.8 12.7 6.4 2.2 -10.0 -3.5 25.2 -6.1 1.8 15.4 20.5 31.1 38.7 28.1 21.7 -8.3 7.5 13.6 8.7 6.8 11.1 -3.2 -19.9 2.0 3.8 4.5 -16.8 11.4
Gross Domestic Product 33.2 24.3 38.3 191.0 2.1 37.3 15.7 4.3 37.8 45.6 13.9 -15.7 -15.0 -5.5 -10.7 -14.4 -0.3 3.0 8.0 23.4 12.4 3.7 -3.0 1.7 6.0 10.7 4.6 -11.4 10.2 17.2 -2.8 3.0 13.8 19.9 26.8 14.7 10.4 25.0 -17.4 23.1 27.1 9.6 1.5 1.3 -13.5 -1.4 6.8 18.6 -1.6 -12.5 18.5
shares
Expenditure on Gross Domestic Product at Cu
ent Prices
(Million Of Saudi Riyals)
1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021*
1- Gross Final Consumption Expenditure 11,704 12,885 14,631 19,180 31,173 51,006 76,267 116,487 152,789 199,644 224,071 287,469 328,508 334,080 328,275 320,315 288,607 284,193 278,267 303,100 331,955 386,717 379,474 368,725 363,029 376,203 404,269 423,223 406,610 406,311 440,899 446,557 447,957 474,483 516,652 586,804 678,442 756,273 869,045 948,829 1,039,590 1,169,823 1,336,583 1,467,257 1,649,013 1,724,946 1,660,089 1,694,622 1,859,511 1,884,537 1,901,320 2,060,917
a) Govt. Final Consumption Expenditure 3,837 4,300 5,098 7,844 13,593 23,908 38,076 47,921 66,217 81,404 86,981 121,864 137,555 132,834 127,048 120,051 111,633 113,040 102,240 119,958 127,824 169,128 152,692 130,976 122,552 125,923 144,783 161,795 155,192 154,095 183,804 188,695 184,517 198,148 221,798 262,650 311,082 322,086 345,098 357,015 400,173 488,062 551,179 628,522 739,156 736,139 624,632 630,978 736,234 721,283 761,122 763,741
b) Private Final Consumption Expenditure 7,867 8,585 9,533 11,336 17,579 27,098 38,190 68,567 86,572 118,240 137,089 165,605 190,952 201,245 201,226 200,264 176,974 171,154 176,027 183,142 204,131 217,589 226,782 237,749 240,477 250,280 259,486 261,428 251,418 252,216 257,095 257,862 263,440 276,335 294,854 324,154 367,360 434,187 523,947 591,814 639,417 681,761 785,404 838,735 909,857 988,807 1,035,457 1,063,644 1,123,277 1,163,254 1,140,198 1,297,176
2- Gross Fixed Capital Formation 3,069 3,515 4,892 7,745 14,242 28,617 48,358 66,767 81,836 93,680 113,438 132,262 130,767 120,238 106,050 83,873 72,695 71,660 62,556 66,392 83,251 100,480 103,955 108,824 93,002 103,316 102,848 109,241 112,959 118,196 123,324 126,095 128,066 148,098 185,872 237,691 288,680 368,687 444,499 414,452 483,921 568,793 614,906 662,455 714,253 732,432 631,838 632,232 646,871 664,690 617,582 737,658
a) Private 60,946 76,753 87,006 93,061 80,420 90,105 89,934 93,139 100,522 105,238 106,971 108,587 109,945 124,807 155,486 182,751 229,939 284,645 334,617 302,364 322,730 350,849 367,975 412,777 449,791 462,083 437,971 456,722 467,682 502,458 463,707 637,985
b) Public 22,305 23,727 16,949 15,763 12,582 13,211 12,914 16,102 12,437 12,958 16,353 17,508 18,121 23,291 30,386 54,940 58,741 84,042 109,882 112,088 161,191 217,944 246,931 249,678 264,462 270,349 193,867 175,510 179,188 162,232 153,875 99,673
3- Domestic Final Demand 14,772 16,400 19,523 26,925 45,415 79,623 124,625 183,255 234,625 293,324 337,509 419,731 459,274 454,318 434,325 404,188 361,302 355,853 340,822 369,493 415,206 487,198 483,429 477,549 456,032 479,519 507,117 532,464 519,569 524,507 564,223 572,652 576,023 622,581 702,525 824,495 967,122 1,124,960 1,313,544 1,363,281 1,523,511 1,738,616 1,951,488 2,129,712 2,363,266 2,457,378 2,291,927 2,326,855 2,506,381 2,549,227 2,518,903 2,798,575
4- Change in Stock 2,351 4,210 3,183 -15,172 35,623 8 21,156 13,254 17,183 5,124 11,964 -363 5,050 33,064 32,342 -3,141 -10,032 -14,797 2,518 3,039 -14,158 -1,516 13,939 15,941 10,051 5,584 7,501 7,468 13,356 12,271 13,958 9,406 11,958 9,651 6,871 10,615 24,885 43,980 87,561 95,884 128,660 110,103 117,616 78,678 101,204 105,996 116,270 112,777 160,812 213,387 111,098 1,441
5- Exports of Goods & Services 12,293 17,403 24,668 55,240 101,463 120,656 134,953 150,167 134,571 206,226 347,345 391,591 266,511 171,681 145,530 113,163 85,989 99,045 103,531 120,494 177,685 189,694 200,772 171,065 172,123 200,437 237,812 243,384 163,099 210,231 308,473 273,677 291,155 371,088 494,702 702,164 844,522 934,321 1,210,701 757,711 981,867 1,410,841 1,497,824 1,453,665 1,329,530 817,539 753,225 899,975 1,180,937 1,071,975 690,608 1,086,807
6- Imports of Goods & Services 5,218 5,776 7,319 11,588 21,284 35,757 54,794 85,154 113,508 128,736 149,437 187,591 205,502 212,775 190,639 137,892 115,239 119,170 116,352 135,961 138,207 180,199 184,746 166,590 131,976 148,720 158,239 161,782 145,616 140,570 175,973 165,219 168,114 194,041 233,814 306,503 425,038 544,434 662,568 607,759 653,261 742,414 807,023 862,128 957,686 927,402 742,913 757,409 785,960 821,028 682,979 761,044
Gross Domestic Product 24,198 32,237 40,056 55,404 161,216 164,530 225,940 261,521 272,871 375,938 547,381 623,367 525,334 446,288 421,558 376,318 322,020 320,931 330,519 357,065 440,526 495,177 513,394 497,965 506,230 536,820 594,191 621,534 550,408 606,439 710,681 690,516 711,022 809,279 970,283 1,230,771 1,411,491 1,558,827 1,949,238 1,609,117 1,980,777 2,517,146 2,759,906 2,799,927 2,836,314 2,453,512 2,418,509 2,582,198 3,062,170 3,013,561 2,637,629 3,125,780
* Preliminary Data
Shares of GDP
C
G
I
X
M
Production Function Calculation
Production function calculations
Equation: Y = A*K^alpha*L^(1-alpha)
Problem 1: given inputs and productivity, find output
A = 2
K = 5
L = 10
alpha = XXXXXXXXXX
Answer:
Y =
Problem 2: given inputs and output, find productivity
Y = 10
K = 20
L = 5
alpha = XXXXXXXXXX
Answer:
A =
Solow Model
Solow model simulations
Idea: each date is connected to the previous one
Inputs (from Penn World Table)
Y0 = 4.0790 (initial GDP)
A0 = 3.4299 (initial TFP)
K0 = 8.2330 (initial capital)
L0 = 0.4520 (initial labor)
alpha = 0.3333 (capital share in production function)
s = 0.2500 (saving/investment rate)
delta = 0.0600 (deprec rate)
a = 0.0000 (TFP growth rate)
n = 0.0000 (labor growth rate)
Simulation
Date TFP Capital Labor GDP Sav=Inv Deprec
2010 3.43 8.23 0.452 4.08 1.02 0.49
2011 3.43 8.76 0.452 4.16 1.04 0.53
2012 3.43 9.27 0.452 4.24 1.06 0.56
2013 3.43 9.78 0.452 4.32 1.08 0.59
2014 3.43 10.27 0.452 4.39 1.10 0.62
2015 3.43 10.75 0.452 4.46 1.11 0.65
2016 3.43 11.22 0.452 4.52 1.13 0.67
2017 3.43 11.68 0.452 4.58 1.15 0.70
2018 3.43 12.13 0.452 4.64 1.16 0.73
2019 3.43 12.56 0.452 4.70 1.17 0.75
2020 3.43 12.98 0.452 4.75 1.19 0.78
2021 3.43 13.39 0.452 4.80 1.20 0.80
2022 3.43 13.78 0.452 4.84 1.21 0.83
2023 3.43 14.17 0.452 4.89 1.22 0.85
2024 3.43 14.54 0.452 4.93 1.23 0.87
2025 3.43 14.90 0.452 4.97 1.24 0.89
2026 3.43 15.25 0.452 5.01 1.25 0.91
2027 3.43 15.58 0.452 5.05 1.26 0.94
2028 3.43 15.91 0.452 5.08 1.27 0.95
2029 3.43 16.23 0.452 5.11 1.28 0.97
2030 3.43 16.53 0.452 5.15 1.29 0.99
2031 3