Abstract
This paper addresses the challenge facing resource-rich nations in the global energy transition by examining Saudi Arabia’s economic transformation under Vision 2030. To identify an optimal pathway, this study quantitatively assesses the macroeconomic trade-offs of different policy speeds, addressing a critical literature gap concerning the unquantified dynamic shocks of sequencing reforms. A dynamic stochastic general equilibrium (DSGE) model tailored to the Saudi economy is employed, featuring sectoral disaggregation and dynamic adjustment costs to capture realistic transition frictions. Using this framework, four distinct scenarios Reference, Accelerated Transition, Delayed Transition, and Hydrogen Leader are simulated through 2050 to analyze the economy-wide effects of different policy choices. The simulations reveal severe risks from improper timing; an accelerated transition triggers a sharp rise in unemployment to 12.3%, while delaying reform leads to a long-term fiscal crisis. The central finding is that a strategic focus on becoming a global hydrogen leader offers the most balanced and resilient pathway, yielding solid GDP growth (3.4%), manageable unemployment (9.2%), and long-term fiscal sustainability. The paper identifies this hydrogen-focused industrial strategy as a viable mechanism for a resource-rich nation to convert its geological inheritance into a sustainable economic future, circumventing the resource curse. It provides critical, data-driven insights for policymakers, demonstrating that the optimal strategy involves transforming not abandoning energy leadership through carefully sequenced reforms, pre-emptive labor market policies, and strategic fiscal investment.