With the oil boom supporting income growth, Saudi Arabia’s consumption growth in the past decade was among the most stellar in emerging markets, as per Bank of America Merrill Lynch.
A large and young population is Saudi Arabia's key asset compared to its GCC peers with such favorable demographics supporting growth in the coming decade. Unlike aging economies where stagnant labor force growth implies a greater need for productivity growth to sustain real economic activity, Saudi Arabia is likely to exhibit strong working-age population growth of 2.2% until 2020, above an average of 0.7% for a broad-based basket of emerging markets countries.
The oil boom, rapid economic and population growth, urbanization drive, low leverage and increased public sector employment has led KSA’s real private consumption to post one of the fastest growth rates in emerging markets over the past decade, as per Bank of America Merrill Lynch.
From 2001 till 2010, KSA’s private consumption grew at a 6.5% annual average rate, on par with India, topping Turkey and South Africa, and only trailing Russia and Malaysia. Similarly, the private real consumption share of real GDP increased by 11 percentage points over 1999-2010 to stand at 52.9% . This improvement has not been uncommon for the rest of the GCC, though Saudi Arabia’s share appears to have grown steadily compared to a more volatile performance in the UAE, marked by a harsh contraction due to the aftermath of the 2009 recession.
The government's dominant position in the Saudi economy has put it in a strong place to support the consumer, through a number of price subsidies, public sector employment, frequent wage increases, inflation alleviation plans and access to a pool of subsidized financing at Specialized Credit Institutions. In addition to strong private sector employment growth (an average of 7.1% annually in 2005-2010), public sector employment growth was steady at an average 3.3% over 2000-2011. The average private sector wage (SR 1,290 per month) is only in line with the salary scale of public sector clerks.
Mena Weekly Monitor – Bank Audi research