A study of the relationship between the growth in the number of Hajj pilgrims and economic growth in Saudi Arabia

In many countries, tourism is one of the most important and ever growing industries in the world which generates jobs and revenues. The sacred places located in some countries provide a particular opportunity to tourism industry to develop toward a sound direction and in a sustainable way. In this respect, Saudi Arabia has a unique situation due to having Mecca and Madinah as well as other sacred and historical sites. However, previous studies have given less attention to the economic aspect of Hajj pilgrimage. To study the Hajj duty from the economic perspective, this study examines the non-oil-based Gross Domestic Product (GDP) growth of Saudi Arabia as a function of the growing number of pilgrims and the investment growth in the Hajj sector. The Vector Error Correction Model (VECM) has been applied to the case of Saudi Arabia to examine the dynamics of the possible relationship between economic growth measured by growth in GDP and the Hajj pilgrimage. All data for the period 1975-2007 are drawn from annual reports of the Central Department of Statistics of the Ministry of Economy and Planning of Saudi Arabia. The findings of the research confirmed the existence of only one bidirectional Granger causal relationship between economic growth and the increasing number of Hajj pilgrims in short-term. Non-oil GDP of Saudi Arabia increases by 0.84 Saudi Arabian Riyal over the long-term in response to a one-digit rise in the number of pilgrims.