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Mon 14 Mar 2016 01:58 PM

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GCC execs facing 'double whammy' of stagnant wage growth, rising cost of living

New research also says increasing number of firms are reducing headcount, particularly in energy and construction

GCC execs facing 'double whammy' of stagnant wage growth, rising cost of living

Average pay rises across the GCC are set to be lower in 2016 than at any time over the past 10 years, despite the rising cost of living caused by cuts in government subsidies, according to new research.

Online recruitment firm GulfTalent said many professionals working across the region are likely to face a double-whammy of rising living costs coupled with stagnant wage growth.

As a result, real salary increases net of inflation are expected to be significantly lower than in previous years, the report said. 

The report found that an increasing number of firms have been reducing headcount, particularly in energy and construction. Overall, 14 percent of surveyed firms in Saudi Arabia reported plans to reduce headcount in 2016, compared with 9 percent in the UAE. 

It added that one source of comfort for residents is falling rents in parts of the region, in an otherwise inflationary market. 

The research report was based on GulfTalent’s survey of 700 employers and 25,000 professionals across the six GCC states.

The study found that salaries across the GCC are forecast to increase at an average of 5.2 percent in 2016, down from 5.7 percent in the previous year.

Saudi Arabia is expected to top the region’s pay increases, at 5.9 percent. However, with inflation in the kingdom forecast at 4.7 percent in 2016, real pay rises net of inflation will average just 1.2 percent.

Professionals in the UAE are expected to enjoy the region’s second highest salary increase at 5.3 percent. Qatar is next with 4.7 percent, followed closely by Kuwait and Oman at 4.6 and 4.4 percent respectively.

Bahrain fares the worst among the six GCC states, with the projected salary increase of 3.7 percent matching the forecast inflation rate exactly, leaving employees with no net increase in their purchasing power.

In addition to lower pay rises, the study reported a marked slowdown in recruitment activity, with employers much more cautious in adding to their payroll. Much of the recruitment activity is now focused on replacement hiring only. 

Sectors that are particularly hit include oil & gas and construction, which depend heavily on government investment, the report said.

However, retail has seen limited impact and healthcare is booming, driven by a combination of population growth and regulatory changes making healthcare provision mandatory for employers, it added.

According to the study, employers currently hiring are having much greater success in securing top candidates than in previous years and some are using this as an opportunity to upgrade their staff.

Some firms are also reporting greater success in attracting nationals, thanks to slower pace of hiring in the public sector.

GulfTalent’s study also noted that, despite a marked slowdown, the situation in Gulf countries remains far more stable than in most other oil-dependent economies. According to the Economist Intelligence Unit, all GCC countries are expected to have stable currencies and register a positive economic growth in 2016, with governments using their reserves to maintain critical investments.

This is in sharp contrast to Russia where the oil price collapse has already led to severe recession and a 50 percent plunge in the value of the currency since 2014.

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One Guy 4 years ago

The 'double whammy' of stagnant wage growth, rising cost of living has been well and truly underway for at least 3 years here in Dubai.

I am not aware of a single person that has received a salary increase in 3 years, yet during this period absolutely everything has risen in price, particularly rents which have gone through the roof in many instances 100' s of percent up. The affordable cost of living in UAE circa 2011 is a long distant memory now.

This has put enormous pressure on residents, who as a result will naturally either - spend less or move away. Both consequences of which are dire for the local retail economy and landlords who don't seem to quite get it yet. This of-course feeds back into a viscous cycle of economic slowdown, which in turn leads to job cuts completing the loop. This is becoming a crisis and will need to be addressed very quickly to avoid a 2009 style melt down.

Mosa 4 years ago

Transportation costs, school fees, medical costs, rents, utilities, groceries, insurance costs, renewal costs...

Does anyone think how is one going to afford all this with their income? The fact is, the majority of the population here earns less than Dhs 9,000 on average, with no signs of improvement in increments or anything close.

Telcoguy 4 years ago

Majority of population are under 4,000 dirhams.

Narayanan V 4 years ago

I just cannot understand why all this incessant whining, yeah this is life and the standard of living is too expensive and will become far more expensive so why don't people seek greener pastures rather than living on hand to mouth without any savings and wasting precious days of their lives?

leo50 4 years ago

good to see the milk of human kindness is flowing well in this comment!

james 4 years ago

Oh I wondered before we read the the playground comment, if you don't like it leave.
Well done Narayanan, you win this week's prize.

Telcoguy 4 years ago

Actually many people have left, they probably do not bother posting here.
Self selection bias and all that.


And quite a few more are planning on leaving, not just the UAE but Qatar and Kuwait too. End of school year will be an interesting time.

Telcoguy 4 years ago

@James, actually the number of "if you do not like..." posts have dropped substantially. If this is because of an increased awareness of how fragile the situation is or because of AB enforcing different policies we can not know. I suspect 2nd.

Just Sayin' 4 years ago

I'm wondering who has actually received a pay raise in the past 3 years as I know of not one person.