Gulf's Stability May Come at Expense of Private Sector: Moody's - Bloomberg

Gulf's Stability May Come at Expense of Private Sector: Moody's - Bloomberg:

Gulf Arab states’ need to maintain social and political stability may come with a cost to the private sector, Moody’s Investor Service said.

Regional governments won’t be able to adequately accommodate the rapidly growing number of job-seekers in the Gulf, forcing the private sector to absorb much of the burden, Moody’s said in a research report. Given that the government pays better, integrating citizens with “inflexible wage expectations” will raise labor costs for the private sector, hamper productivity and make it harder to develop the non-oil economy, it said.

A projected rise in the population of Gulf states and a tightening of fiscal positions is forcing governments to revisit their status as employers-of-first-resort, altering a decades-old social contract where the oil-rich nations looked after their citizens in return for loyalty. Wage bills constitute the biggest spending item for most Gulf states and public finances have been battered since an oil slump started in 2014.