Average salary increases in Qatar and GCC likely to be lower this year

DOHA: Average salary increases in Qatar and the GCC are expected to be lower this year than at any time in the past 10 years despite the rising cost of living, according to a regional study released yesterday by online recruitment firm GulfTalent. Salaries in the GCC are forecast to increase at an average of 5.2 percent this year, down from 5.7 percent in the previous year.

“Many professionals in 2016 are likely to face a double-whammy of rising living costs, coupled with stagnant wage growth. As a result, real salary increases net of inflation are expected to be significantly lower than in previous years,” the report said. One source of comfort for residents is falling rents in parts of the region, in an otherwise inflationary market, the report found.

The report was based on a survey of 700 employers and 25,000 professionals in the six GCC states, conducted during December 2015- February 2016. Saudi Arabia is expected to top the pay increases, at 5.9 percent. However, with inflation in the kingdom forecast at 4.7 percent this year, real pay rises net of inflation will average 1.2 percent. Professionals in the UAE are expected to enjoy the region’s second highest salary increase (5.3 percent). Qatar is next (4.7), followed by Kuwait (4.6) and Oman (4.4). Bahrain fares the worst among the six GCC states, with the projected salary increase of 3.7 percent matching the forecast inflation rate exactly, leaving employees with no net increase in their purchasing power. The study also reported a marked slowdown in recruitment activity, with employers more cautious in adding to their payroll. Much of the recruitment is focused on replacement hiring.

Sectors particularly hit include oil and gas and construction, which depend heavily on government investment. Retail has seen limited impact and healthcare is booming, driven by a combination of population growth and regulatory changes making healthcare provision mandatory for employers. Some 68 percent of healthcare companies surveyed reported an increase in their head count last year.

The study found that, with fewer jobs in the market and candidates seeking stability, employee turnover had fallen in most sectors. It warned that employers failing to meet the pay expectation of their top performers due to financial pressures could risk losing them to competitors. The study also noted that despite a marked slowdown, the situation in Gulf countries remains far more stable than in most other oil-dependent economies.

According to Economist Intelligence Unit, GCC countries are expected to have stable currencies and register a positive economic growth this year, with governments using their reserves to maintain critical investments in sharp contrast to Russia where the oil price collapse has led to severe recession and a 50 percent plunge in the value of the currency since 2014.