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ZAWYA #jobs of 18 April 2019, elaborated on the slowing growth that appears to be creating challenges for the Saudi jobs market, hence:

Hiring activity in the kingdom remains ‘subdued’, according to ICAEW/Oxford Economics survey.

Slowing growth creates challenges for Saudi jobs market

Image used for illustrative purpose Members of the Chambers of Commerce in the Saudi capital Riyadh vote for a new president of the commercial body in rare elections November 11, 2008.
Image used for illustrative purpose Members of the Chambers of Commerce in the Saudi capital Riyadh vote for a new president of the commercial body in rare elections November 11, 2008. REUTERS/Fahad Shadeed By Michael Fahy, ZAWYA

Growth in Saudi Arabia’s economy will slow slightly this year, creating a challenge in terms of generating enough jobs for its citizens, an economist has told Zawya.

A new Economic Insight: Middle East Q1 2019 report published by accountancy body ICAEW (Institute of Chartered Accountants in England and Wales) and Oxford Economics said that it expects economic growth in the Kingdom to slow marginally in 2019 to 2 percent, down from 2.2 percent in 2019 as oil revenue falls due to Organization of the Petroleum Exporting Countries-mandated production cuts and “only a modest acceleration in non-oil activity” due to the challenging business environment.

The report said that although it expects growth in Saudi Arabia’s non-oil sector to grow by 2.6 percent this year, supported both by an expansionary fiscal policy and reforms aimed at boosting the private sector, hiring activity remains “subdued”.

Mohamed Bardastani, ICAEW economic advisor and Middle East senior economist at Oxford Economics, told Zawya in a telephone interview that the jobs market in Saudi Arabia has been “extremely challenging, and we don’t see it changing any time this year”.

He explained that that in the two years between the end of 2016 and the end of last year, the country’s Labour Force Survey showed that more than 1.5 million jobs were lost among expats –  a result of “the economic slowdown, various fiscal consolidation measures, but most importantly the measures that the government took in terms of applying expat levies and expat dependent fees on private sector companies”, Bardastani said.

“The private sector, historically speaking, has been relying on expat workers. Around 80 percent of the private sector is made up of expat workers. So obviously, this will have ramifications on growth,” he said.

Moreover, unemployment among Saudi nationals remains stubbornly high at 12.7 percent, considerably above the 7 percent target set under the kingdom’s Vision 2030 goals.

“Historically speaking, the public sector most of the time absorbed the new job entrants. This is one of the main challenges in Saudi right now. I think it is the most pressing challenge, where you have around a 12-7-12.8 (percent) unemployment rate and you have around 400,000 graduates (each year), and then job creation is relatively weak,” he said.

Tough choice

Bardastani said that the government faces a difficult choice, “between either absorbing those new job market entrants and increasing its spending, which will lead to higher budget deficits” or continuing to push through reforms in the expectation that they create enough opportunities for private sector companies to generate jobs.

“I think, for sure, that’s going to take some time,” he said.

The survey also stated that it expects faster non-oil growth in the United Arab Emirates, but again a limited increase in employment opportunities.

Growth in the non-oil economy is set to increase to 2.1 percent this year, up from 1.3 percent in 2018, on the back of expansionary budgets and “pro-growth government initiatives”, such as the 50 billion dirham ($13.6 billion) ‘Ghadan 21’ initiative in Abu Dhabi, but job creation has slowed in key sectors, including services and manufacturing.

Bardastani said firms that have seen input costs rising have been unable to increase selling prices due to competitive pressures.

“So you have this squeeze in profitability margins. Many firms are becoming more efficient in terms of producing the output – they have to do more with less resources. That’s why job creation has been weak.”

A jobs survey also published on Wednesday by recruitment firm Michael Page was more upbeat on the prospects for Saudi jobseekers, stating that 64 percent of respondents were positive about the current job market in the kingdom. It also said 86 percent of respondents said that they expect the jobs market in Saudi Arabia to improve over the next six months.

In a press release announcing the survey results, Michael Page Saudi Arabia’s operating director, Domenic Falzarano, said: “Given the kingdom’s commitment to its Vision 2030, the bulk of the hiring is taking place in the financial services, infrastructure, entertainment, tourism and healthcare sectors.”

(Reporting by Michael Fahy; Editing by Mily Chakrabarty)

(michael.fahy@refinitiv.com)