S&P Global expects Saudi Arabia’s unemployment rate to drop to 6% by 2023

Zahabia Gupta, Associate Director of Sovereign and International Public Finance Ratings, S&P Global

Saudi Arabia’s unemployment rate peaked in 2020 and will decline to 6% by 2023, which is still slightly above the 2019 level, Zahabia Saleem Gupta, associate director of Sovereign and International Public Finance Ratings at S&P Global Ratings, told Argaam.

Job creation for the population will be supported by the government’s efforts to boost the non-oil economy and social transformation of the country, though funding pressures might slow the pace, she said.

The government also implemented Saudization policies in its workforce under the Nitaqat scheme to increase the participation of nationals in the private sector. Nonetheless, the challenges to meet rising job creation needs among a large youth population include the skills and productivity gap between nationals and expats, and lower appetite for some private sector jobs among citizens, partly due to large wage differences with the public sector.

Commenting on the latest report issued by S&P Global titled "Expat Exodus Adds To Gulf Region's Economic Diversification Challenges", Gupta explained that the exodus of expat workers from Gulf countries in 2020, due to the economic fallout from COVID-19 and oil price shock, has accelerated a shift in the region's labor markets that is expected to continue through 2023.

“We estimate that the population declined by 4% on average last year across the GCC,” she added.

These changes could have repercussions for the regional economy and pose additional challenges to diversifying away from the hydrocarbon sector in the long run, if not met with reforms to improve human capital.

“We see reforms that improve education and skills of the national population, participation of women in the workforce, labor market flexibility, and competition as key to unlocking sustainable growth in the region,” Gupta concluded.