Dutch Disease phenomenon has been a critical issue for the development of resource abundant economies. Therefore, it is easy to hypothesize that KSA, possessing one of the biggest oil reserves in the world, is also prone to this disease. This paper attempts to explain the effect of oil boom on Saudi economy with special reference to Dutch Disease using time-series annual data for the period 2004 -2014. To this end, the effects of massive oil revenue on the growth of non- oil sectors are examined using a methodology that exploits the possibility of adverse causality. I find the evidence to believe that the latest KSA boom is having an adverse impact on non-oil sectors. The evidence also suggests that the channel for these effects is the real exchange rate fluctuation caused by oil revenue. However, the results indicate that some explanatory variables adjustment had a significant impact on expansion of tradable sectors.

KEYWORDS: Dutch Disease, Oil Boom, Energy, Natural Resources, Saudi Economy and Spending Effect.