(MENAFN - Arab News) Over 15 million young people will enter the workforce in Qatar, the United Arab Emirates (UAE), Saudi Arabia and Egypt over the next decade, according to Zawya news wire quoting the latest report released by Ernst & Young.
The Middle East and North Africa (MENA) region has a relatively young and fast-growing labor force, and the greatest challenge will be to create employment and develop the non-oil economy, the report says.
"The average annual growth rate in the labor force in MENA over the next 10 years is expected to be around 2 percent. While a growing labor force adds to potential growth in the region, creating jobs for this next generation in MENA will be one of the most important economic developments," says a senior analyst at Ernst & Young.
The forecast provides a four-step response to the issue of job creation. These are promoting entrepreneurship and creating the right environment for new businesses, developing the nonoil economy, education and training, and targeted public spending on infrastructure. According to the International Monetary Fund (IMF), infrastructure investment can have a sizable impact on employment generation - about 40,000 annual direct and indirect jobs can be created in the short term for every 1 billion spent on infrastructure projects. On this basis, 1 percent of GDP spent on the right kind of infrastructure projects could generate up to 87,000 new jobs in Egypt, for example.
Qatar, the United Arab Emirates, Saudi Arabia and Egypt will receive less of a boost from rising oil prices over the next decade, but should register an average growth of 4 percent per annum. Of the four MENA rapid growth markets (RGMs), Qatar, with its large oil and gas reserves, will continue to be the fastest growing. MENA RGMs are attempting to offset weaker external growth through fiscal programs, the report says.
Robust public spending, however, remains a strong contributor to growth particularly in Qatar and Saudi Arabia. In Qatar, large capital spending increases coupled with rises in wages, pensions and benefits for all state and military employees helped boost the economy. Saudi Arabia's GDP growth rate of 6.1 percent in 2011 was largely attributable to support from government spending, especially on infrastructure. In the UAE, GDP growth has been supported by the oil sector, tourism and business services as well as government spending. The UAE economy has been insulated somewhat from the problems in the eurozone through close links with the fast-growing Asian economies.
Many countries in the region are attempting to offset some of the weaker external growth through fiscal programs. Saudi Arabia has announced a multi-year spending package equivalent to 19 percent of total GDP. In 2011, the bulk of the extra spending was on increased employment and social welfare, including wages and subsidies, but in future years, the focus will be on capital spending, directed mostly toward the housing sector.
Spending programs, particularly on expanded subsidies and transfers, have been implemented in Egypt, as the country responds not only to the political uncertainty, but the economic downturn and higher commodity prices. Monetary policy has also been supportive. Qatar, Saudi Arabia and the UAE have further cut or maintained their already low interest rates.