Expat Exodus Threatens Gulf Economies, S&P Says

Gulf Arab states lost up to 4% of their population last year in an “exodus” of expatriate workers that could complicate the diversification of the region’s economies, S&P Global Ratings warned in a report.

The share of foreigners relative to citizens in Gulf Cooperation Council countries is set to drop further through 2023 “because of subdued non-oil sector growth and workforce nationalization policies,” credit analysts led by Zahabia Gupta said Monday in one of the first glimpses into the region’s demographic dynamics during the coronavirus pandemic.

“GCC countries’ productivity, income levels, and economic diversification may stagnate in the long term without significant investment in the human capital of the national population and improvements in labor-market flexibility,” they said.

The six nations comprising the GCC -- Saudi Arabia, the United Arab Emirates, Qatar, Kuwait, Bahrain and Oman -- heavily depend on foreign workers in industries as diverse as construction and finance. Expats make up almost 90% of the region’s private-sector workforce, according to S&P.

Expat Exodus Threatens Gulf Economies, S&P Says

The energy-reliant economies in the region sank into a recession last year following the shocks of lower oil prices and the global health emergency, forcing many expats whose residency visas were linked to jobs to head home.

Despite the longer-term challenges, the “accelerating shift in the labor market” poses little danger for now, “given that the majority of foreign workers returning home filled low-income positions,” the report said.

“These demographic shifts will have limited impact on the region’s economic growth and our ratings on GCC sovereigns in the near term, in our view, with hydrocarbon production and prices remaining the key drivers,” the analysts said.

S&P also said:

  • “If these changes are not met with economic and social reforms that foster human capital, they could have repercussions for the regional economy in the long term and pose additional challenges to diversifying away from the GCC’s heavy reliance on the hydrocarbon sector”
  • Nationalization policies could weigh on growth and diversification if they get in the way of productivity, efficiency or competitiveness
  • Strong government balance sheets as well as the willingness and ability to implement reforms that support a dynamic private sector will be important to their economies in the long term

To view the source of this information click here

©2021 Bloomberg L.P.

BQ Install

Bloomberg Quint

Add BloombergQuint App to Home screen.