Unemployment rate in Saudi drops as more women, youth enter workforce

Localization and economic recovery will add more jobs for citizens this year, according to Jadwa Investment

  
Image used for illustrative purpose. A Saudi woman works inside the first all-female call centre in the kingdom's security sector, in the holy city of Mecca, Saudi Arabia August 29, 2017.

Image used for illustrative purpose. A Saudi woman works inside the first all-female call centre in the kingdom's security sector, in the holy city of Mecca, Saudi Arabia August 29, 2017.

REUTERS/Suhaib Salem

More women and youth entered Saudi Arabia's job market during the last quarter of 2020, pushing overall unemployment numbers further. Labor force participation rose in Q4 2020 to 51.2 percent, up from 49 percent in Q3 2020, with higher participation by both genders.

According to the latest data from The General Authority for Statistics’ (GaStat), unemployment declined to 12.6 percent in the fourth quarter of 2020, down from 14.9 percent in the previous quarter.

The decline in unemployment figures in Saudi Arabia was mostly due to a drop in female unemployment, which declined to 24.4 percent from 30.2 percent in Q3, Jadwa Investment said in an analysis.

This bodes well for the current year as well. The investment bank expects a broad-based recovery towards the end of 2021.

“The recovery in the labor market has proceeded quicker than we anticipated (with Saudi unemployment at 12.6 percent at the end of 2020, versus our forecast of 14 percent). At the same time, however, the swift recovery reinforces our view that Saudi unemployment will decline to 12.1 percent by the end of 2021,” Riyadh-based Jadwa Investment said.

Youth unemployment (20-24 years old) fell from 34.2 percent in Q3 2020 to 28 percent in Q4 2020. Male unemployment also declined in Q4, although at a slower pace.

The number of expatriates in the labour market declined by 121,000 quarter-on-quarter in Q4. GaStat data shows that 200,000 new private sector expatriate work visas were issued in Q4, versus 46,000 in Q3. The sharp rise was primarily due to a massive jump in visas for female expats, 181, 000 in Q4, versus only 4,000 in Q3.

The construction sector witnessed the largest number of expatriate departures, followed by administrative and support services.

Substitution of expatriates with Saudis slowed during Q4, especially in sectors which had shown sizable substitution in Q3, such as wholesale and retail and manufacturing.

On a sectorial basis, public administration and accommodation and food services saw the largest rises in employment for both Saudi and expat workers in Q4.

Vigorous economic recovery

Looking ahead, Jadwa said some fluctuations in the rate of unemployment during H1, cannot be ruled out, especially due to the suspension of recreational events and services due to the rise in the number of COVID coronavirus cases.

“That said, with the ongoing roll-out of vaccines in the Kingdom, we are expecting a more vigorous economic recovery in the second half of 2021, which, along with ongoing localization efforts (such as the recent MHRSD decisions to raise the level of Saudization in shopping malls, supermarkets, restaurants and coffee shops), will help create more employment opportunities for citizens,” Jadwa said in its report that analysed GaStat data.

The structural changes that are being implemented as a result of the new labor reforms in the Kafala system are also expected to improve job mobility and flexibility for expats in the private sector, which, in turn, will help reduce the wage gap between Saudis and expats.

The kingdom’s Vision 2030 which seeks to diversify the economy and move away from oil dependency, has set a target to create millions of jobs and reduce unemployment to 7 percent by 2030.

(Writing by Brinda Darasha; editing by Seban Scaria)

brinda.darasha@refinitiv.com

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© ZAWYA 2021

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