Job creation and employment growth across the Middle East and GCC is expected slow in 2019 due to subdued non-oil growth despite higher government spending plans, according to rating agency Moody’s.
Moody’s analysts expect overall GDP growth in the GCC to remain broadly unchanged this year, at 2.3% on average. The cuts in oil production agreed by OPEC plus 7 nations in December 2018 will lead to stable or slightly decelerating oil GDP growth, while non-oil GDP growth is expected to pick up only modestly. From a sovereign credit perspective, the rating agency said the main significance of growth in the GCC, particularly in the non-oil sector, is a driver of job creation for the burgeoning national populations.
In the current environment, we at Calvin·Farel expect unemployment to be broadly unchanged or rise slightly further across the region of the Middle East. Over the longer term, demographic trends will cause joblessness to climb, unless the participation of nationals in the private sector increases significantly.
Non-oil growth is expected to remain subdued compared to before the oil price shock, although all GCC countries except Bahrain are likely to see non-oil growth stabilize or increase in 2019 from 2018. Moody’s expects non-oil growth to stay around 3% in 2018-19 and average 3.4% in 2020 for the region as a whole.
Latest purchasing managers’ index (PMI) data from the UAE and Saudi Arabia showed a decline in both output and employment growth in the non-oil private sector. The UAE’s PMI for December for example dipped to a two-year low from 55.8 in November to 54 in December signaling a slow pace of growth in the non-oil private sector. December’s headline PMI marked the slowest pace of expansion in the non-oil private sector since October 2016, and has weighed on the 2018 average, which declined to 55.5 from 56.1 in 2017.
December PMI data showed the continuation of a weak rate of employment growth across the non-oil private sector across both the UAE and Saudi Arabia.
For decades, the economic prospects of the Middle East, especially the GCC have been primarily measured by its hydrocarbon resources. Recent years, however, have witnessed a clear acknowledgement of the need to diversify the economic model. Fortunately for the GCC, it has another resource that has the potential to transform the economies. That resource of its young population. Today, the Gulf countries are home to some of the world’s youngest populations. While parts of the world are struggling to cope with ageing demographics, as much as 54% of the GCC’s population is less than 25 years – a statistic that bodes well for economic development.
By looking through the eyes of this younger generation and understanding what makes them tick, Calvin·Farel and Inventive Ventures joined hands and will launch the crowd funding platform, the MembersClub, jumpstarter and the knowledge platform open-mind. We jointly identified opportunities that not only create a more progressive culture but also and most importantly support future economic growth and create long-term value for investors. With our business models we support the younger generation through our platforms in the future, provide companies and investors with the opportunity to benefit from an economic transformation. To us, the best place to start with an economic transformation in the Middle East is to start providing and creating jobs for the young population by supporting entrepreneurship. Unemployment remains a concern in the region of the Middle East, especially for the youth. Regional governments have already gone to great lengths to business reforms, which are laying the ground work for a new wave of Middle Eastern entrepreneurship. In April last year for example, Dubai announced a raft of ways in which they would attract investment to the region, while unilaterally lowering the cost of doing business. And in May last year, nationwide plans were unveiled to cut red tape – smoothing the path for overseas investments in the UAE.
But to further activate the role of the private sector in truly investing in their young, GCC countries need to pave the way for greater sector participation in their economies. This would allow companies to capitalize on the innovative ideas of young talent to thrive in a competitive marketplace. By carving out a clear space where the private sector can operate, countries can help secure not just the future of their young people, but also of the businesses that help drive national economies.
The public and private sector efforts in our opinion can only go so far without having the right talent to work with. To us, there is growing consensus that the skills required will focus on mental elasticity, complex problem solving, critical thinking, creativity summarized as 21st Century skills. Traditional educational systems are still not well positioned to impart these skills to the required extent. This is why Inventive Ventures will launch their knowledge and skill learning platform “open-mind.ae” in the second half of this year to reduce the knowledge and skill gap required by the private sector.
There is, therefore, a large and interesting opportunity in our opinion that can come up with suitable platforms like open-mind.ae for providing technical, vocational and intellectual skills to equip young nationals with the skills for the jobs of the future. There are in our opinion definite opportunities for investors to tap into this through investing in the education sector in areas such as schools with suitably modified curricula, all the way to edutainment businesses.
Businesses should look in our opinion towards the ever – evolving pattern of consumption of this emerging group of consumers and how it is likely to be very different from its predecessors. The critical intelligence will help both businesses and investors alike to identify innovative new ways to meet these needs.
Businesses, investors and entrepreneurs that get an early understanding of these patterns, and develop the ability to cater for them, in our opinion will be the success stories of the region for many years to come.
So when will BER finally open?
In late October last year, Englebert Lutke Daldrup, head of the committee that’s running the construction project, predicted a new opening date.
“All the experts tell me there are no shortcomings at BER Airport we can’t fix,” he told a Bundestag committee. ” I am convinced that BER will be put into operation in October 2020.”
Only a few are counting on that…