Rising salaries to boost GCC economy in 2012
Posted on 31 December 2011 with no comments from readers
UAE nationals working for the federal government are getting 35 to 100 per cent salary increases but recruitment consultants Towers Watson reckon salaries for expatriates will also rise though by a lesser 5.7 per cent in 2012.
Findings by HR consultants Mercer interviewing 300 firms across the region confirmed the optimistic outlook with Qatar and Saudi Arabia to raise salaries by a slightly larger six per cent.
Austerity over
2011 saw an end to the salary freezes of the previous two years with salaries up by an average of 6.2 per cent in Saudi Arabia, 5.8 per cent in Qatar and 5.5 per cent in the UAE.
The rising salaries reflect the economic improvement in the oil states where revenues from hydrocarbons have been at record levels, something far more critical to their economies than the vagaries of the Arab Spring, although that has benefited the UAE as a safe haven.
Oil revenues look robust going into 2012 with worries about a slump in the eurozone balanced by considerations of what more money printing by the global central banks will mean for oil prices.
It is certainly remarkable that oil prices are still hovering around the $100-a-barrel level with the global economy once again flirting with a recession. Imagine what prices would be like in a recovery.
And that is the good news for the oil producers. If the global economy recovers oil prices will push still higher. If the global economy falters then central banks will print more money and that generally benefits commodity prices like oil.
Real estate hangover
However, not all sectors of the Gulf economy will benefit equally. Real estate and construction is still suffering from the debt and oversupply hangover from the boom that went bust three years ago. Banks and financial institutions are also under pressure from bad loans and anaemic local stock markets.
On the other hand, higher salaries are good for consumer spending and the retail sector. And this will help to offset any slowdown coming from a recession overseas, such as less visitors for the hotels of the Gulf.
The jury is still out on when this renewal of growth in the GCC economies will start to boost local stock markets. That will likely require some resolution of the major issues confronting global financial markets first.
