Weekly Insights 16 Sep 2022: Economic Activity Indicators in Saudi Arabia & UAE

Weekly Insights 16 Sep 2022: Economic Activity Indicators in Saudi Arabia & UAE

1. Saudi Arabia’s manufacturing sector posts double-digit yoy growth for the 6th consecutive month in July

• Saudi Arabia reported a 14-month high inflation rate of 3% yoy in Aug, largely driven by food prices (4.31%) and multiple services-related activities like recreation (5.05%) and restaurants & hotels (7.35%). Transport prices inched up to 4% in Aug, after 2.5% and 3.6% rises in Jun and Jul
• The impact of inflation has been cushioned for low-income families via the distribution of SAR 10.4bn as direct cash transfers as well setting a cap on local fuel prices; this is not a sustainable measure (especially considering fiscal consolidation efforts & the net-zero commitment by 2060)
• Wholesale price inflation slowed to 5.6% yoy in Aug, with most categories easing – metal products which have a high weightage in the overall index eased to 3.16% (Jul: 5%); food products remained close to the 9% mark. Year-to-date, wholesale prices have increased by an average 11.4%

3. Dubai tourism emerges strong even during the summer months: total visits touch 8.1mn in Jan-Jul, surpassing 2021’s total (7.28mn) & almost 3X vs 2.85mn in Jan-Jul 2021. A stronger recovery is expected come winter, with lower temperatures & more events including Qatar’s World Cup

4. Will inflation play spoilsport? Dubai’s inflation rate climbed to 7.1% in Jul, averaging 4.3% in Jan-Jul

• Inflation in Dubai increased to 7.1% yoy in Jul, largely due to the rise in food and beverage prices (+8.75%) and transport costs (38.61%). These sectors have a high weight in the overall index (11.66% and 9.32% respectively) other than housing (40.68%)
• However, the price rise is evident across most categories, especially in services, many of which could affect tourist spending in the coming months: the most eye-popping is the 43.97% surge in recreation costs while smaller upticks can be seen in restaurant and hotels (5.6%) and clothing & footwear (4.5%). Another word of caution: the strong dollar and weakening euro could make visits relatively more expensive

5. Is there any evidence of wage inflation in the UAE?

• The UAE Central bank, in its Q1 Quarterly report, disclosed that based on the Wage Protection System, the number of employees and wages increased by 8.1% and 4.9% at end-Mar, the highest level since the series started in 2012
• Separately, the UAE Ministry of Human Resources & Emiratisation, disclosed in a report in Aug that the number of private sector employees grew by 9% yoy to 5.4mn in Q2 2022; fastest growth in employees was reported in the agriculture sector in Q2; ~26% of employees were working in the construction sector while another 21% and 19% were in trade and repair services and business services respectively (Caveat: both these capture mostly mainland-based firms)
• Publicly available data for 2020 compiled from the UAE labour force survey 2020 and the Ministry of Economy (MoE) Annual Report 2021offer additional insights:
  • By economic activity group, the share of employed workforce (aged 15+) in public administration & defense sector accounted for 6% of the total in 2020 (Source: FCSA Labour Survey), but account for about 1/5^th of total compensation (Source: UAE MoE)
  • Excluding domestic workers, female employees in the UAE worked mostly in education (12%), health & social work (8.4%) and wholesale & retail trade (7.5%) in 2020
  • About 30% of total employed population in the UAE and one-third of all women work as either managers or professionals

6. UAE Labour Force Survey 2020: 80% of the workforce fall within 25-49 years of age;  unemployment rate is low at 4.3%, but female unemployment rate is at 5.7%

• Close to 80% of the labour force fell within the 25-49 age group in 2020; only 1% of the working women are aged over-60 (vs. 3.6% of men). Labour force participation rate was 86.4% among males and 65.7% among females
• Overall unemployment rate in the UAE was only 4.3% in 2020, the rate was much higher at 13.1% among 20-24 year olds and 7% among those in the age group 25-29
• High educational attainment, but jobless: among those unemployed, almost 40% had a Bachelor’s degree or equivalent; close to 45% of the unemployed women had completed a Bachelor’s degree

7. An overview of UAE’s private sector establishments & labour data 2011-2021

• The UAE Ministry of Human Resources & Emiratisation (MOHRE) have made available data on the number of firms and employees in the private sector (who are registered with the Ministry; likely excludes all free zone firms/ employees)
• As can be seen from the below charts, there was a downward trend in the number of employees registered with the MOHRE after 2014, with the sharpest dip registered during 2020 (-5.8% yoy due to Covid impact). However, in 2021, employees grew by 2.2% to 4.9mn. Interestingly, new firms continued to grow by 2.6% and 6.6% in 2020 and 2021, with number of establishments at a record high 373k in 2021
• Employees were concentrated mostly in construction and trade & repair services (together ~50% of total in 2021) while the highest share of firms were in trade & repair (35%), followed by construction (19%). The highest number of employees per firm were in education (62 per firm) and mining & quarrying (42.4)

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