The increased participation of women in the labour force in Saudi Arabia, combined with greater spending opportunities, boosted domestic consumption in the kingdom in the first quarter, supporting the strong growth of wholesale and retail trade, according to a new report.
The wholesale and retail trade sector expanded by 7.5 per cent in the first three months of the year and now accounts for a little less than 10 per cent of the kingdom's overall gross domestic product, Jadwa Investment said in a report.
“Demand is being propelled by women joining the workforce, while on the supply side, there is ever-increasing scope to spend new incomes on entertainment and domestic tourism,” it said.
As part of Saudi Arabia's Vision 2030 agenda, aimed at diversifying its economy away from oil, the kingdom plans to increase the participation of women in the workforce.
Female representation in the labour force increased to 36 per cent over the past three years from 20 per cent, Jadwa said in an April report.
The increase was spurred by expanding childcare and transport services, which added to new job opportunities in developing sectors such as tourism, leading to more women joining the labour market, it said.
Tourism is also a key part of the kingdom's diversification plan, with the country aiming to attract 100 million visitors by 2030.
Saudi Arabia now claims the title of the world’s fastest growing tourism destination, according to data from the UN World Tourism Organisation.
In 2022, more than 93.5 million tourists visited Saudi Arabia – 77 million domestic and 16.5 million international visitors. This year, the kingdom hopes to attract 30 million tourists, after a record first quarter when it hosted 7.8 million international arrivals, Ahmed Al Khateeb, Minister of Tourism for Saudi Arabia, told an investment forum in Paris this week.
Saudi Arabia's economy grew by 3.8 per cent in the first quarter on an annual basis, boosted by growth in the non-oil sector, the General Authority for Statistics said this month.
The country's GDP expanded at a slightly softer pace in the three months to the end of March than the initial estimate of 3.9 per cent.
The non-oil sector grew 5.4 per cent in the first three months of the year compared with the same quarter in 2022, while oil activities rose 1.4 per cent during the period, Gastat data showed.
Within the non-oil sector, another industry that recorded strong growth in the first quarter was construction, the Jadwa report said.
“Following a challenging couple of years (mainly Covid-19-related), the construction sector appears to have rebounded quite forcefully, growing by an annual 5.5 per cent in the first quarter,” it said.
The sector's average growth for the past four quarters has been 5.9 per cent.
“The sector has obviously benefitted from the surge in public sector investment, most notably around giga-projects, though housing construction has also been a significant tailwind,” the report said.
“There are some constraints around labour and other inputs, though this is hardly surprising given the pickup in pace of project roll-out as interim Vision 2030 deadlines loom.”
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The bio
Favourite book: Peter Rabbit. I used to read it to my three children and still read it myself. If I am feeling down it brings back good memories.
Best thing about your job: Getting to help people. My mum always told me never to pass up an opportunity to do a good deed.
Best part of life in the UAE: The weather. The constant sunshine is amazing and there is always something to do, you have so many options when it comes to how to spend your day.
Favourite holiday destination: Malaysia. I went there for my honeymoon and ended up volunteering to teach local children for a few hours each day. It is such a special place and I plan to retire there one day.
MATCH INFO
Who: UAE v USA
What: first T20 international
When: Friday, 2pm
Where: ICC Academy in Dubai
UAE currency: the story behind the money in your pockets
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
UAE currency: the story behind the money in your pockets
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