But the historical record is revealing. Historically, ratios in excess of 90–100% of GDP have been found to exert a lasting drag on growth, perhaps of around 1 percentage point.2 At these levels, government debt has in the past been growth-sapping – and fear-enhancing. That adds to pressures on debt sustainability, which depends importantly on the wedge between interest costs and GDP growth. Psychological scarring These balance sheet scars are real. But in financial markets, risk perceptions are as important as reality. Behavioural economics tells us that financial crashes can leave lasting psychological scars on risk-taking. These mean that perceptions of risk can be systematically over-stated – the fear of fear itself. One potent psychological factor is disaster myopia. Psychologists know from experimental evidence that, faced with uncertainty, people base their judgements on simple rules of thumb or heuristics.3 One such rule of thumb is the “availability heuristic”. This states that agents base probabilistic assessments on the ease with which an event can be brought to mind: how recently it has occurred, how severe are its effects and how personal is the experience. Car crashes are the classic example. These often arise from disaster myopia, as drivers systematically under-estimate the probability of a pile-up and drive too fast. The longer the period since the last crash, the greater the risk-taking. After a lengthy stretch of clear motorway, risk appetite may become too healthy, and risk-taking too great, relative to the true probability of disaster. In other words, drivers are disaster-myopic.

Such challenges have all been the preoccupation of your majesty, and you have been constantly urging the authorities concerned to overcome them. The most prominent of those challenges are the following: First: employment of the Saudi youth, which constitutes one of the major challenges facing the national economy. In spite of the good achievements made in the preceding period, estimates indicate that unemployment among Saudis amounted to about 9.6 percent in 2009. Given the rate of population growth and structure, it is important to continue intensifying current efforts to increase investment to develop the human capital with the active participation of the private and public sectors. Efforts should be intensified for Saudizing the jobs in the private sector, and obstacles hindering this process should be considered and eliminated. The percentage of Saudization fit for the nature of each activity and sector needs to be determined, and work should be made to activate the procedures and regulations that respect productivity and safeguard the rights of workers and employers alike. Second: good utilization of economic resources of our country, most notably oil and gas that represent the most important elements of the economic development of the Kingdom. Figures indicate that the rates of domestic consumption of the Kingdom’s oil and gas are growing at high rates, recording an average growth of 5.9 percent during the past five years. This is a high growth rate compared to the population growth and the size of GDP, which calls for investigating the reasons for such an increase and rationalizing it.