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The Gulf Cooperation Council (GCC) region’s population, which is a huge advantage for expat-dependent economies, has declined by about 4 percent in 2020 due to an exodus of foreign workers, S&P said.
The decline, which is expected to continue through 2023, could impact the economy in the region and pose additional challenges to ongoing efforts to move dependence away from oil revenues.
“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 labour market,” S&P said.
“These changes could have repercussions for the regional economy and pose additional challenges to diversifying away from its heavy reliance on the hydrocarbon sector in the long run, if not met with economic and social reforms that foster human capital,” S&P said.
Gulf countries are dependent on migrant labour. In the UAE alone, foreign workers represent an estimated 88 percent of the population.
Previous estimates by Oxford Economics suggested that the UAE will have lost hundreds of thousands of foreign residents to expat exodus last year, roughly 10 percent of the population.
Outflows
The outflows stemmed from significant job losses or redundancies in many sectors across the region that have been hit hard by the coronavirus pandemic.
According to S&P’s estimates, Dubai may have posted the sharpest decline in population last year, followed by Oman, Qatar, Abu Dhabi and Kuwait.
In Dubai, where about 92 percent of the population are expatriates, the number of residents is estimated to have declined by 8.4 percent to 3.1 million. Across the GCC region, the population dropped by 4.1 percent to 55.4 million.
“The overall GCC population is unlikely to return to the 2019 level of 57.6 million until 2023, owing to weaker economic conditions and labour nationalisation policies,” said S&P.
The shifts, however, will not have an immediate impact on S&P’s ratings on GCC sovereigns, given that the majority of foreign workers returning home filled low-income positions, thus limiting their contribution to the economy.
“However, the GCC’s high dependence on expat labour, especially in the private sector, has stymied its 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.”
Nationalisation
Prior to the pandemic, governments across the region had rolled out nationalisation programmes to boost the participation of local citizens in the private workforce.
The measures include restricting the hiring of expatriates and increasing the recruitment of GCC nationals at private organisations, including huge multinational firms.
“We believe these nationalisation policies could hamper economic growth and diversification if they impede productivity, efficiency or competitiveness,” said S&P.
It said 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 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.”
In recent months, a number of reforms have been introduced in the UAE to retain its attractiveness to foreigners. Last month, the UAE announced that non-Emiratis, particularly investors, scientists, doctors, engineers, artists and authors, can now obtain UAE citizenship
(Reporting by Cleofe Maceda; editing by Mily Chakrabarty)
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