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29 February 2024

Egypt crisis is a “wake-up” call for all

Inflation in Saudi Arabia, which had entered double-digit levels in 2008, eased in recent months to 5.4 per cent as of December. (AGENCIES)

By Staff

The crisis in Egypt and the preceding overthrow of the Tunisian president should prompt other Arab governments to step up reforms to tackle unemployment and improve the living standards of their citizens, a key Saudi bank said on Tuesday.

Emboldened by the success of Tunisians to oust their 20-year ruler, Egyptians are demonstrating against the soaring cost of living, growing poverty and mounting unemployment, Banque Saudi Fransi (BSF) said in a flash note sent to Emirates 24/7.

According to the UNDP, at least 90 per cent of those unemployed in Egypt are under the age of 30. Inflation in Egypt has held in double-digit levels for about three years – surpassing 20 per cent in many months in 2008 while food inflation is around 17 per cent currently.

“The events in Egypt thus act as a wake-up call to governments across the Middle East about the pressing need to address serious inadequacies of employment opportunities and income levels, and have shed light on the need to re-build the middle class, which shrunk in size in most countries over the past decade,” it said.

“Regional governments are also likely to continue feeling obliged to sustain and introduce new policies, such as price controls or subsidies, to help their populations deal with the rising cost of living. Middle East economies and Gulf oil exporters should take note of events in Tunisia and Egypt and enact important economic reform policies that are long overdue.”

BSF noted that Gulf oil exporters have not faced as steep rates of inflation and in some countries, like Qatar, a deflationary trend persists following a record high rate recorded in 2008.

Inflation in Saudi Arabia, which had entered double-digit levels in 2008, eased in recent months to 5.4 per cent as of December.

“We expect annual inflation to average 5.1 per cent this year, historically high for a country that experienced average inflation of 0.8 per cent between 1990 and 2006.… still, the government is capable, if necessary, to step in with measures to ensure that food prices do not rise too substantially this year.”

The kingdom also suffers from an unemployment problem, although less pronounced than is the case in Egypt, the report said.
Its figures showed unemployment among Saudi nationals rose to around 10.5 per cent in 2009, including 30.2 per cent youth unemployment based on government data used by the ILO.

Such statistics have led the government to dedicate about a quarter of its budget spending allocations to education, with the 2011 education budget soaring to triple its size in 2000.

Meanwhile, per capita income is much higher in the Gulf than it is in Egypt. Saudi GDP per capita was $16,039 in 2010 – compared with about $2,500 in Egypt, according to BSF.

“Still, turmoil in Egypt underscores the necessity for faster reforms to fight unemployment and encourage private sector job creation. Saudi Arabia’s private sector is not creating enough jobs for nationals, who comprise only about one of every 10 employees.”