Growing female workforce helps drive Saudi economy

Reuters/Faisal Al Nasser

• Closing gender employment gap could add 57% to Mena GDP, or $2trn
• 60% of unemployed Saudi women keen to take jobs in next two years
• Female participation rate jumped from 18% in 2017 to 37%

Saudi Arabia’s non-oil economy is forecast to grow by more than 5 percent this year, driven in part by an influx of women joining the country’s workforce.

Expansion of the female labour force has been described as “one of the stand-out successes” of the kingdom’s Vision 2030 programme and shows no signs of slowing. 

The increased number of women at work is also feeding into the growth of consumption, with the retail and wholesale sector performing particularly strongly in 2022, say analysts at Jadwa Investment.

Strategies such as Vision 2030 have ushered in new legislation that make it easier for women to get a passport, move house or get protection from discrimination in the workplace while, since 2018, women were given the green light to drive in the kingdom, enabling overall mobility.

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In economic terms, closing the gender employment gap could add 57 percent to the GDP of the Middle East and North Africa, or $2 trillion, according to recent calculations by PwC Middle East.

James Reeve, chief economist, Jadwa Investment, told AGBI: “I think the tailwind from female participation is set to last for some years, since participation is still only 37 percent against a global average of around 50 percent. 

“Some 60 percent of unemployed Saudi females say they are keen to enter the workforce in the next two years, and given that they tend to have higher educational qualifications than their male counterparts, this suggests that they are more likely to secure well paid jobs.” 

He added: “With salaries comes disposable income, and this has gone hand-in-hand with liberalisation around driving and a plethora of new entertainment activities on which to spend this money.

“We see consumption, which is the largest segment of the economy, as the bedrock for growth in the years ahead.”

According to latest figures, the female participation rate has jumped from 18 percent in 2017 to 37 percent. In the same period, female unemployment has dropped by more than 10 percentage points to just over 20 percent.

Reeve pointed to the enabling support that has come from the Ministry of Human Resources and Social Development through schemes such as Qurra (childcare support) and Wosool (transportation) which has removed previous barriers to women getting jobs.  

According to the General Authority for Small and Medium Enterprises, startup businesses owned by women reached 45 percent in the first half of last year, double the number registered in 2017.

Overall GDP growth is set to slow to 2.8 percent in Saudi Arabia in 2023 from last year’s world-leading 8.7 percent as oil production is reined in, Jadwa said.

It added Saudi oil policy will remain conservative and the country’s hydrocarbon GDP will edge down by 0.2 percent.

“The authorities are not yet convinced that oil demand is sufficiently robust to absorb an increase in supply, especially with non-Opec output likely to stage a recovery this year. Thus, the authorities say they are committed to keeping output at the November 2022 level,” analysts noted.

At the same time, experts see growth in the non-oil economy as being increasingly broad-based. Investment and consumption are growing in tandem, with giga-projects such as Neom, Amaala and the Red Sea Project driving the former and female labour force entry underpinning the latter. 

The construction sector is expected to benefit from a further “intensification” of giga-project work, while there is also likely to be support from a pick-up in more mundane civil infrastructure projects, some of which stalled during the coronavirus period.

However, Jadwa added that real estate is expected to soften in 2023 as higher interest rates continue to take their toll on demand.

According to Reeve, non-oil exports will get a lift from China. 

“I think China’s re-opening will provide an important boost to the kingdom’s petrochemicals sector,” he said. “China is now Saudi Arabia’s main trading partner, but that largely reflects the fact that the US is now self-sufficient in oil rather than a conscious decision by Saudi Arabia to pivot towards China.

“I’m fairly sure that the US will remain an important strategic partner – probably the most important – for many years to come.”