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16-04-2012 - The national/by Neil Parmar

Economic woes weigh on Middle East and North Africa's middle class

Many middle-class residents in the Middle East and North Africa (Mena) are unhappy with their economic prospects, although they feel more optimistic about the road ahead, a report has found.

Nearly 30 per cent of respondents in a survey conducted across Saudi Arabia, Egypt and Morocco reported they were worse off now than they were five years ago, while 43 per cent said they were concerned about the state of their particular country's economy.

Among middle-class entrepreneurs, a quarter have had either to relocate businesses or close due to economic difficulties, according to the consultancy Booz & Co, which surveyed more than 1,450 middle-class residents in a study designed to help policymakers better understand this segment of the population.

"The middle class is a bellwether for a nation's overall prospects, and its confidence in the economy can determine the future direction of that economy," said Richard Shediac, a senior partner at Booz & Co and the leader of its public sector practice in the Middle East.

By some measures, however, confidence is low.

Some 46 per cent of respondents said the job market was "bad" or "poor". And many noted they valued job security more than money, reflecting either a sense of uncertainty about the future jobs market or a tendency to avoid taking risks with their careers, Booz & Co said.

But the company did not analyse the middle class in the UAE, specifically, and some experts say the socio-economic dynamics are playing out differently here compared with elsewhere in the Mena region.

The consultancy Towers Watson said, on average, working professionals in the Emirates have been earning salary increases high enough to outpace inflation.

"The country's growing; it means a slight pay increase of about 5 per cent this year, and [workers] are ahead of inflation," said Billy Turriff, who leads the data, surveys and technology business at Towers Watson in the Middle East.

"In that situation people are benefiting," he added.

Among those who feel dissatisfied with their current standard of living in Saudi Arabia, Egypt and Morocco, however, 53 per cent cited inflation as their primary worry.

The UAE's smaller population and higher level of wealth relative to other countries in the Mena region also means there is a smaller middle class to begin with, which lowers overall negative sentiment and job-related dissatisfaction.

"We are much better positioned," said Nizar Lallani, the chief executive and country manager in the UAE for Antal, a recruitment firm.

Government announcements about increased spending on public infrastructure in the Mena region, as well as jobs for nationals, has helped raise optimism.

About one-third of those surveyed in Saudi Arabia, Egypt and Morocco by Booz & Co said they believed their children would benefit from a better standard of living than they currently had.

But while middle-class workers are often seen as a catalyst for positive socio-economic change in developing countries, they have not been a strong contributor of entrepreneurial innovation or GDP generation in the region, Booz & Co found.

An over-reliance on public sector jobs, combined with fledgling small to medium enterprises (SMEs) and weak education systems across the region is generally holding back the middle class's development, it said.

"To a certain extent, that reliance on the government did not produce the middle class akin to other countries, where the middle class usually represents an anchor for society," said Hatem Samman, a director at Booz & Co.

Mr Samman said the middle classes in developing economies elsewhere in the world had created "a vibrant economic sector through entrepreneurship, the private sector and SMEs".

"This is something we need in the Mena region," he said.

Booz & Co based its survey on responses from people who reported their monthly net household income within a specified range, those who categorised their own income as "average" and people who identified themselves as belonging to the "middle class".


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