Many Middle Eastern countries are beginning to wake up to the challenges they face in boosting productivity, which lags behind global peers and, for most countries in the region, it has been falling for many years, according to the latest Middle East Economy Watch from consultants PwC, which provides insight into the region’s productivity challenge. The UAE, however, has been the world leader in the field over the last few years.
The International Labour Organisation data shows that real productivity grew by 10 percent globally in 2010-2017, but only the UAE exceeded this rate and many countries saw their productivity fall over this period. The Gulf countries have largely led the other MENA countries since the inceptions of both the World Bank’s Doing Business Index and the World Economic Forum’s Global Competitiveness Index, according to the PwC report. The UAE is the clear leader in both indices and advanced a further five ranks this year to 21st globally in Doing Business.
Investment in technology, notably artificial intelligence, AI, and robotics, will have a unique impact in the Gulf as expatriates, made redundant by technology, will just depart resulting in a less dense but more productive population. Richard Boxshall, Senior Economist at PwC Middle East, added "The combination of investment, leadership and improving education could lead to substantial productivity gains."
Commenting on the business environment, Boxshall said, "The Gulf countries have largely led the other MENA countries since the inception of both indices, although methodological changes in Doing Business contributed to sharp declines for some of these countries a few years ago."
The extension of oil production cuts naturally dragged down GDP for oil producing economies in 2017, with annual economic growth for the GCC expected to come in at around half a per cent in 2017, the report said. Meanwhile, some non-GCC countries are beating expectations, including Iraq and Egypt.
In the GCC, the most notable surprise, the report said, is that inflation has been much weaker than expected, recording in October 0.7 percent, year-on-year.
In 2018, the dominant economic driver for the year will be oil producer action, the report predicted. However, the big question remains if attempts to bring inventories level back to their long-term averages and thereby stabilise prices, will be impacted by the increased US shale production, the report added.