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Saudi Arabia said to see only tiny GDP boost from lifting of driving ban

Saudi Arabia, July 7, 2018

Saudi Arabia’s lifting of its ban on women driving, which took effect this week, is will likely boost Saudi Arabia’s potential GDP growth by just 0.1 percent a year, according to a new report.

The end of the ban should help raise the share of women in the workforce but estimates from the Oxford Economics indicate it will not have much impact on economic growth.

The labour participation rate among Saudi women stands at just over 22 percent, remaining the lowest globally and is almost 8 percent below that in Oman, which has the second-lowest rate in the Gulf region, the report said.

For the Saudi female labour participation rate to converge close to Oman’s current level of 30 percent by 2030 would require a rise of about 0.6 percent over each of the next 12 years. This would modestly undershoot the targets enshrined in the country’s Vision 2030 economic plan, the report added.

'The economic impact of the end of the driving ban will largely depend on how many of the new female entrants to the labour market actually find work, which is expected to be a big challenge,' added Oxford Economics.

It noted that the expansion of the female labour force will also reinforce an already-high unemployment rate among Saudi nationals, as more women compete for a limited number of jobs.
The total number of jobless Saudis stands above 770,000, or 12.8 percent of the total domestic workforce. But the figures mask a gender gap, as women account for 55 percent of the total workforce.

Reducing the unemployment rate to 7 percent over the next 12 years is a central aim of the government’s Vision 2030 economic reform plan but the target will likely be missed unless the government can persuade nationals to either work for more competitive wages or enrol in skills training programmes to enhance their employability, the report said.

Oxford Economics added that job creation has averaged 430,000 positions annually over the past 10 years, while the labour force grew by an average of 475,000 per year over the same period.

It said the government is expecting about 150,000 new Saudi entrants to the labour force each year for the next 10 years. The public sector has accommodated the majority of Saudi labour market entrants in the past, but lower oil prices constrain its ability to sustain the pace of new job creation.

It is doubtful whether the private sector will be able to carry the burden, despite the country's Saudisation policy, which was first rolled out in 2011.

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