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Private sector may not keep up with Saudi youth bulge

Saudi Man for illustrative purposes

Central bank statistics from 2011 showed nine in 10 working Saudis were employed by the public sector.

July 25, 2013 9:43 by



Saudi Arabia may not be able to create all the private sector jobs it needs for its rapidly growing population, which could lead to higher unemployment, the International Monetary Fund said on Wednesday.

The Saudi government has recognized that low employment among Saudi nationals is a long-term strategic challenge, especially after joblessness contributed to revolutions in nearby countries during the Arab Spring.

The world’s largest oil exporter has invested in education and infrastructure, and has strict quotas regulating the number of Saudis and expatriates in private sector jobs. Saudi Arabia has more than 9 million expatriates whose remittances home provide important revenue for countries including Yemen, India, Pakistan and the Philippines.

Most of those expatriates work in the private sector, in retail and construction – jobs that Saudi citizens may not want or have the skills for, the IMF said.

“A large number of young people will enter the labor market in the next decade and beyond, and creating a sufficient number of rewarding jobs for them in the private sector will be a challenge,” the IMF said in its regular health check of the Saudi economy.

The Fund said recent history shows the private sector may not be able to absorb all the new job seekers. While total employment in the country has grown 8.5 percent from 2010 to 2012, employment among Saudi nationals has risen only 4.6 percent.

It also called on Saudi Arabia to address high unemployment among youth and educated women, which is higher than in other countries with similar incomes. Unemployment among Saudis is now 12 percent, but it is 30 percent for youth and 35 percent for women.

Central bank statistics from 2011 showed nine in 10 working Saudis were employed by the public sector, which is largely funded by oil revenue. The IMF said reducing reliance on public- sector jobs must be a priority, which means Saudi nationals must become more competitive and improve their skills.

Saudi Arabia needs to act now to boost growth in the private sector, as the oil output its economy is dependent on is likely to slow over the next five years, the IMF said.

The kingdom has been the third-best performer among the Group of 20 leading economies, after China andIndia. Its economy has grown an average of 6.25 percent in the last four years.

But the boom years may be behind it, as Saudi Arabia must adjust to a sharp rise in shale production in the United States, as well as the recovery of oil fields in Libya and Iraq, the IMF said.

The Washington-based Fund expects Saudi Arabia’s economy to grow 4 percent this year and 4.4 percent in 2014, below government projections, as oil output falls 3.3 percent this year.

The IMF also called on Saudi Arabia to reduce its energy subsidies, as it has one of the highest levels of energy consumption in the world per person, and some of the lowest prices. The subsidies could start to bite into the government’s budget and make the economy ever-more reliant on the energy sector.

“Staff recommended that the authorities start planning for an upward adjustment in domestic energy prices,” the IMF said.

The IMF has launched a big push in the past year to urge developing and advanced economies to rein in their energy subsidies in order to ease budgetary pressures and free up money to spend on education and healthcare.



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