By Souhail Karam
Survey of 765 companies shows 74% will stop hiring in first half 2009.
Almost three out of four Saudi companies expect to freeze hiring new staff over the next two quarters because of a slowdown in the world's top oil exporter's economy, a SABB bank survey showed on Saturday.
"As the slowdown in the economy is unfolding we are not surprised with 74 percent of the respondents who expect over the next two quarters to institute a hiring freeze," HSBC's Saudi affiliate said in a quarterly survey of 765 companies.
"It is evident that the labour market is no longer facing a dearth of skilled workforce," it added.
The percentage of respondents expecting business growth over the next two quarters has fallen to 42 percent, down from 54 percent in the fourth quarter and below half its level in the third quarter of 2008. Only a quarter of respondents reported a rise in production capacity.
Saudi Arabia has so far suffered less from the repercussions of the global financial crisis than some Gulf Arab countries such as the UAE and Kuwait.
But since it has the largest population in the region, the kingdom faces a bigger challenge in meeting growing job demands from its native population.
Official unemployment in the kingdom stands at 9.8 percent of the native 17 million population.
The fortunes of the Saudi private sector hinge on government spending, which in turn is linked to the price of crude oil. Oil has tumbled by more than half from record levels above $147 a barrel in July to about $45 now.
Business confidence indicator continued to decline in the first quarter due mainly to the fall in oil prices, SABB said.
A five-time reduction of interest rates since October which led to interbank rates being slashed by more than two-thirds has changed businesses' expectations, SABB said.
Only 29 percent expect interest rate to fall over the next two quarters down from 71 percent in the third quarter.
But despite the fall in the interest rates almost four out of five of the respondents prefer cash and deposits to other investments such as in real estate, bonds and equities.
About a third of the respondents spoke in favour of cash and deposits in the fourth-quarter's survey.
"It is no surprise that preferences have changed as the global economic landscape continues to worsen and local equities are ailing," SABB said.
The bank also noted that only 7 percent of respondents anticipate the cost of real estate to appreciate in the next two quarters down from 46 percent in the previous quarter and 68 percent in the third quarter of 2008.
Half the respondents expect real estate prices to fall in the six months to September and 38 percent expect these to remain unchanged. (Reuters)