There is no doubt that last year’s drop in oil prices have had a dramatic effect on the Saudi economy. On top of cuts in subsidies that have led to transport costs rising by 7.7% and cuts to state spending affecting many sectors, next year will bring the introduction of VAT. GDP growth in the world’s 20th largest economy has reached its lowest point in the last three years, with the IMF constantly revising its forecasts to make them even more subdued. Nevertheless, consumer sentiment remains positive, according to a research study by OMD Arabia, the marketing performance company that is part of Omnicom Group. “The Future of Saudi Arabia” study, produced in collaboration with Hall & Partners, has found that 4 out of 5 Saudi nationals claim to be happy with their present life. Two-thirds of respondents have favorable sentiments about their personal finances and 45% intending to make immediate major purchases.
The public sector, which employs nearly two thirds of Saudi nationals, experienced its first cuts in salaries for ministers, bonuses and paid holidays in 2016. This was expected to lead to a 20-30% drop in a typical family spending. With deteriorating public finances, the state is struggling to sustain its role as a major national employer and several measures are being taken to reduce the dependency on the state for jobs. To attract Saudis to the private sector, the weekly working time was reduced from 45 to 40 hours last year while public sector recruitment slowed down and early retirement was incentivized with attractive packages. With the goal of creating some 450,000 private sector jobs by 2020, with quotas for Saudis, the government is rolling out the red carpet for foreign investors, including with relaxed visa rules. The state’s significant direct investments in both Uber and Careem have also been seen as signs that the plan includes giving females better mobility in order to achieve a greater participation in the workforce.
If some worry that the National Transformation Plan (NTP) requires a significant shift in the mindset of the population, OMD’s study indicates that Saudis believe that the planned changes are for the better when it comes to employment. Nearly two thirds of respondents, surveyed in December 2016, believe the Kingdom will become a more creative place for businesses. While the private sector is deemed as an option, over half find self-employment to be more attractive than being an employee of a big company. The younger the respondents, the more positive the sentiment: Over 60% of 18- to 34-year-olds believe that the Kingdom will be successful in becoming a non-oil economy and undergo growth in the future, one where SMEs and startups will thrive and foreign investments flourish.
Unemployment is a major cloud on the horizon and while foreign capital is welcome, foreign workers are less so. Over half (58%) of Saudis believe that in the dependency on expatriate workers will decrease in the future. What’s more, 73% of respondents believing that Saudization is the way to reduce unemployment. A major game changer will be women’s participation in the workforce, which 69% expect to grow in the future.
To achieve these employment goals, the education sector will have to improve in order to provide companies with business-ready recruits. There is a paradox about the school system in the Kingdom: while 70% of respondents to OMD’s survey are happy with the country’s education system, about half believe a degree is no longer a worthwhile investment. This is largely driven by the older generations, 45% of whom feel education was better before. Yet, the majority of respondents still prefer to have their children remain in the Kingdom for their primary, secondary and higher studies.
Part of the solution may be found in strategic partnerships with major technology firms, like the one between SAP and Prince Sultan University. The public-private partnerships are valuable efforts by the Kingdom to fortify its IT sector, which is why 69% of the survey’s respondents also claimed to believe that technology will play a greater role in the educational curriculum. After real estate and the financial sector, technology is the third industry people anticipate will drive the economy forward.
Despite economic reforms and austerity measures taking place to combat falling oil prices, Saudi consumers remain confident about their future and the Kingdom’s ability to become a prosperous economy. OMD’s research confirms that these steps are boosting the confidence levels of Saudi nationals about their economic future, with 78% of respondents stating they believe Vision 2030 will improve their lives.
While confidence in the government’s plans is high, the sense of personal responsibility in achieving the goals appears much softer. This is apparent is aspects where personal effort is required, like fitness or the environment. Like in other similar surveys by OMD around the world, there are paradoxes and contradictions in what people see ahead of them, the result of a mixture of excitement and anxiety. More details are emerging from the survey and will be shared in the coming weeks. kiwibox.com