New Aon survey shows actual increases remain lower than forecasts due to slowing economy, low oil prices
Saudi Arabia continues to lead the region in salary increases, according to a GCC-wide survey of 600 multi-national companies and locally-owned conglomerates by Aon.
The largest study of its kind in the Gulf region showed that, just as in 2016, actual salary increases remain lower than forecasted, influenced largely by a slow economy and low oil prices.
The survey showed that actual salary rises in Saudi Arabia reached 4.4 percent this year, ahead of Kuwait and the UAE (4.3 percent), Qatar (4.2 percent), Bahrain and Oman (3.9 percent).
Projected rises for 2018 are also highest in Saudi Arabia, Qatar and Kuwait (4.5 percent) while increases of 4.3 percent are expected in the UAE and Oman and 4 percent in Bahrain.
Aon said the region-wide VAT of 5 percent to be implemented in January 2018 is expected to help improve GDP growth but will add to the rising inflation in the region, leading to cost pressures.
"While employers choose to remain conservative in the projected salary increase of 2018, we may witness an upside in the actual salary increase, thanks to an improving economic situation as a result of increased government spending, stabilised oil prices, and the effects of economic transformation programs," Aon added.
According to the survey, actual salary increases this year are highest for the Life Sciences (5.1 percent) and High Tech sectors (4.6 percent), while the Construction/Engineering and Transportation/Logistics/Shipping Services sectors suffered the lowest salary increases at an average of just 2.4 percent.
Robert Richter, GCC compensation survey manager, Aon Hewitt Middle East, said: "Despite lower than projected salary increases this year, there is optimism in the region over Saudi Arabia's Vision 2030 and Expo 2020 with the potential for thriving new industries and a significant level of job creation in the region as a whole. With the stabilisation of oil prices, we can also expect the economy to stabilise and strengthen in the coming years.¨