No work, all play: Will expanding private sector solve Saudi's unemployed youth problem?
The International Monetary Fund warned Saudi Arabia Tuesday that failing to expand its private sector may hurt its economy dramatically in the future, according to Reuters.
According to the IMF report, Saudi Arabia needs to expand private sector job opportunities in order to simultaneously satisfy demand for jobs and reduce its dependency on oil exports for revenues.
“We need more private-sector growth – even much more stronger – to absorb the potential labor supply,” said Min Zhu, deputy managing director of the IMF.
According to KSA's Finance Minister Ibrahim Alassaf, the private sector grew to 700 billion riyals ($187 billion) in 2011, representing 58 percent of the country's gross domestic product. In 2012, private companies employed approximately 250,000 more Saudis than the year before, making the total number of national workers approximately 1 million. Despite these figures, KSA's substantial private-sector growth has not been matched with more job opportunities or decreased unemployment rates.
Alassaf has acknowledged that for KSA to develop its private sector, it must continue to "[accelerate] structural reforms aimed at improving the business environment.”
KSA previously implemented economic reforms during the early 2000s aimed to develop its private sector, but the country's unemployment rate has remained in the double digits, reaching a peak of 12.4 percent in 2011. On top of that, data shows that approximately 60-70 percent of Saudis do not work at all, according and those that do, are still working in government jobs.
Before November's massive deportations of expatriate workers, foreigners occupied most of the private sector jobs in KSA. However, it may be too soon to tell if the immediate rise in job vacancies will be matched by Saudis' willingness to fill the labor gap accordingly.
Alassaf also mentioned in his comments that KSA considers youth unemployment as one of its biggest challenges, along with its dependency on oil exports as the economy's main revenue source.
“The global credit expansionary cycle is ending,” he said. “That means [the Middle East] needs to look at more growth drive from inside the economy rather than from external demand.”
Saudi Arabia is the world's top oil exporter and China is KSA's main crude market.
- No pain, no gain: Tunisian economy needs three years of tough love before rebounding
- How will MENA economies look in 2015?
- Sanctions face-off: Iran to unveil its corporate side in London next week
- Going cold turkey: a look into Israel's impending $4 billion privatization drive
- A futile endeavour? Recruitment of 1.2 million expats defeats Saudization drive