The Impact of Energy Investment on Economic Expansion in Saudi Arabia

Abstract

Economic growth increasingly depends on modernizing and diversifying industries, particularly with the transition to renewable energy. The economic effects of these changes remain unclear. This study explores the role of Saudi Arabia’s renewable energy investments and industrial innovation in shaping key economic variables. Using an ARDL model, we examine data from 95 renewable energy firms between 2000 and 2023. The results indicate that renewable energy investments significantly enhance long-term GDP growth, trade balance, and FDI, but their influence on employment and foreign asset accumulation is less pronounced. Industrial innovation also contributes to economic growth and trade, though to a lesser extent, with sales growth driving foreign asset expansion. In the short term, both sectors show minimal effects on employment and foreign assets. However, when combined, renewable energy and industrial innovation amplify their positive impact on GDP and trade, underscoring the importance of long-term strategic planning to sustain economic development.