News Middle East16 Feb 2021

GCC:Expat exodus adds to Gulf Region's economic diversification challenges -- S&P

| 16 Feb 2021

GCC countries are experiencing an accelerating shift in the labour market from an exodus of expatriates, which could weigh on the region's growth and complicate economic diversification over the long run, states S&P Global Ratings in a report released yesterday.

"We expect the population will have declined by just over 4% on average last year across the GCC, mainly due to migrant outflows," said S&P Global Ratings credit analyst Ms Zahabia Gupta. "While some expats will return as the economic cycle recovers, we project the proportion of foreigners in the region will continue to decline."

She added, "If these changes are not met with economic and social reforms that foster human capital, they could have repercussions for the regional economy in the long term and pose additional challenges to diversifying away from the GCC's heavy reliance on the hydrocarbon sector."

S&P does not expect that these shifts will have an immediate impact on GCC sovereign ratings though, given that the majority of foreign workers returning home filled low-income positions, limiting their contribution to the economy.

The GCC's high dependence on expat labour--especially in the private sector where it makes up almost 90% of the workforce--has stymied the development of human capital in the national population. The majority of the local workforce is employed by the public sector, which weighs on governments' fiscal positions, especially in times of lower oil prices.

GCC governments are increasingly implementing policies to boost nationals' participation in the private sector, mainly through measures that restrict the hiring of expats. S&P believes these nationalisation policies could hamper economic growth and diversification if they impede productivity, efficiency, or competitiveness.

The GCC's longer-term economic trajectory will depend on the strength of governments' balance sheets as well as their willingness and ability to implement reforms that support a dynamic private sector.

"Specifically, we see reforms that improve GCC national populations' education and skills, the participation of women in the workforce, labour market flexibility, and competition as paramount to unlocking sustainable growth in the region," said Ms Gupta.

| Print | Share

Note that your comment may be edited or removed in the future, and that your comment may appear alongside the original article on websites other than this one.

 

Recent Comments

There are no comments submitted yet. Do you have an interesting opinion? Then be the first to post a comment.