GCC and MENA aren't saving: Almost 3 in 10 save nothing at all
People in other parts of the world think that employees in the Gulf make more money than their counterparts in other markets. After all, it’s an oil-rich region and many employees earn a tax-free income.
However, a recent survey by Towers Watson, a global professional services company, revealed that more than a quarter (28 per cent) of residents in Middle East and North Africa (Mena) do not save anything at all. Majority of them (55 per cent) are indeed able to save, but they pocket only less than 10 per cent of their income.
A similar pattern is noted in the GCC region, where more than a fifth of the residents don’t save anything, and almost half save less than 10 per cent of their earnings.
“This contradicts the impression that residents of the GCC save a significant proportion of their income and is surprising given the prolonged global economic uncertainty,” Towers Watson said in its “Savings and retirement attitudes survey”.
The survey collated responses from more than 2,600 employees working for organisations across the Mena region. It looked at employee’s savings behaviour and retirement readiness, as well as their preferences towards employment rewards and benefits.
Zaki Zahran, senior economist at Towers Watson, explained that the survey results for Mena included countries like Egypt, Jordan and Syria where employees generally have low monthly income. Across the Mena region, 25 per cent of the residents earn less than $1,000 (Dh3,670) a month.
“When we focused on the GCC, we saw that the proportion of people earning $1,000 a month or less drops to 7 per cent, and around a quarter (26 per cent) earn $2,000 or less, therefore indicating a higher income distribution.”
Zahran said Mena and GCC regions showed different savings rates, 13.88 per cent and 15.37 per cent, respectively, but both don’t fare better than China and India, where corresponding rates stand at 27 per cent and 22 per cent, respectively.
Steve Gregory, managing partner at Holborn Assets, said the low savings rate can be attributed to inability of people’s salaries to keep pace with inflation. “Generally, especially for the less fortunate wage earners, wages have failed to keep pace with inflation or average earnings. The result is that at least a quarter of employees have no ability to save,” said Gregory.
“Rules concerning shared accommodation are causing people to pay more for accommodation rather than risk being caught sharing. This in turn pushes up rent prices at the lower end of accommodation costs,” he added.
The amount of money that people are able to save is also rather low. The survey found that a significant proportion of respondents (45 per cent) in Mena have savings of less than $5,000, although 13 per cent reported savings between $5,000 and $10,000, and a further 10 per cent reported savings between $10,000 and $20,000.