Domestic Savings as a Pillar of Long-Term Stability Amid Socioeconomic Challenges: Key Determinants in Oil-Rich Developing Economies

Domestic savings ensure economic stability, facilitate investment, and promote long-term growth. In oil-rich developing countries, however, socioeconomic challenges, such as the financial burden of high dependency ratios, inflation, income inequality, and gaps in financial inclusion, significantly impact savings behavior, potentially obstructing sustainable development. Thus, understanding the determinants of savings is essential for addressing these challenges and fostering financial security. This study investigates the key factors influencing domestic savings in Saudi Arabia, focusing on GDP per capita, fiscal balance, financial development, inflation, and dependency ratios. Saudi Arabia was chosen due to its distinctive economic structure, oil reliance, and ongoing diversification efforts under Vision 2030. Covering the period from 1975 to 2020, the research analyzes the effects of major economic reforms on savings behavior. Utilizing secondary data from the World Bank, the study employs the Augmented Dickey-Fuller (ADF) test and the Autoregressive Distributed Lag (ARDL) model to assess both short- and long-term relationships. The findings reveal that GDP per capita, fiscal balance, and financial development positively influence savings, underscoring the significance of economic growth and financial stability in alleviating socioeconomic disparities. Conversely, inflation and dependency ratios negatively impact savings, illustrating how increasing living costs and demographic burdens diminish household savings capacity. These results carry important policy implications. Expanding financial inclusion, stabilizing inflation, and addressing demographic challenges through education, labor market reforms, and social security programs can enhance savings rates and bolster economic resilience. Financial institutions can leverage these insights to create tailored savings products that promote wealth accumulation among lower-income groups. This research offers a framework for reducing income inequality, strengthening financial security, and supporting sustainable economic development in Saudi Arabia and other emerging economies facing similar challenges.