15 million 'set to enter workforce in Mena'
Dubai, February 28, 2012
Over 15 million young people will enter the workforce in the Mena region over the next decade, a report from Ernst & Young said.
The Mena region has a relatively young and fast-growing labour force and the greatest challenge will be to create employment and develop the non-oil economy, the second quarterly Rapid-Growth Markets Forecast said.
Bassam Hage, Mena markets leader, Ernst & Young, said: “The average annual growth rate in the labour force in Mena over the next 10 years is expected to be around 2 per cent a year. While a growing labour force adds to potential growth in the region, creating jobs for this next generation will be one of the most important economic developments.”
The forecast provides a four step response to the issue of job creation: promoting entrepreneurship and creating the right environment for new businesses, developing the non-oil economy, education and training and targeted public spending on infrastructure.
Infrastructure investment can have a sizeable impact on employment generation – about 40,000 annual direct and indirect new jobs can be created in the short term for every $1 billion spend on infrastructure projects, according to the International Monetary Fund (IMF).
On this basis, 1 per cent of GDP spent on the right kind of infrastructure projects could generate up to 87,000 new jobs in Egypt, for example.
Qatar, UAE, Saudi Arabia and Egypt will receive less of a boost from rising oil prices over the next decade but should register an average growth of 4 per cent pa. Of the four, Qatar, with its large oil and gas reserves, will continue to be the fastest growing.
Robust public spending, however, remains a strong contributor to growth particularly in Qatar and Saudi Arabia. In Qatar, large capital spending increases coupled with rises in wages, pensions and benefits for all state and military employees helped boost the economy.
Saudi Arabia’s GDP growth rate of 6.1 per cent in 2011 is largely attributable to support from government spending, especially on infrastructure.
In the UAE, GDP growth has been supported by the oil sector, tourism and business services as well as government spending. Its economy has been insulated somewhat from the problems in the Eurozone through close links with the fast-growing Asian economies.
Many countries in the region are attempting to offset some of the weaker external growth through fiscal programs. Saudi Arabia has announced a multi-year spending package equivalent to 19 per cent of total GDP.
In 2011, the bulk of the extra spending is on increased employment and social welfare, including wages and subsidies, but in future years, the focus will be on capital spending, directed mostly toward the housing sector.
Spending programs, particularly on expanded subsidies and transfers, have been implemented in Egypt, as the country responds not only to the political uncertainty, but the economic downturn and higher commodity prices. Monetary policy has also been supportive. Qatar, Saudi Arabia and the UAE have cut further or maintained their already low interest rates.
The global downturn and the euro area sovereign debt crisis have depressed growth in the Mena region. For oil exporters, the impact is much less, reflecting more government resources to increase spending and their closer links with faster-growing Asian economies rather than Europe.
But oil-exporting countries are also being impacted by the deterioration in the international financial markets and the withdrawal of European banks from doing business in external markets.
As a result, global debt financing is becoming more difficult and costly, while project finance deals are taking longer to finalise. Oil importers such as Egypt are much more directly impacted.
Close to 30 per cent of Egypt’s export of goods are destined for the Eurozone and a significant proportion of their remittances, FDI inflows and revenue from tourism come from Europe as well.
Slackening demand, turbulent and volatile markets and credit liquidity problems in Europe are beginning to squeeze rapid growth markets (RGMs) but not to the extent of derailing robust economic performance. The RGMs are expected to grow collectively by 5.3 per cent this year, in stark contrast to the mild recession expected in the Eurozone in H1 2012 and modest growth in the US.
While growth in the RGMs will continue to be the envy of advanced economies, in the near term, they are showing the strains from the falloff in demand from the Eurozone, as well as the buffeting to financial markets and business confidence over the past few months.
As a result growth in 2012 is expected to be lower than forecast by RGMF in October. However, these markets will continue to contribute nearly half of the world’s growth over the next three years. – TradeArabia News Service