The monumental decision recently made by His Highness King Salman bin Abdulaziz and the top echelons of Saudi Arabia’s leadership allowing women in the kingdom to drive, may have been hailed by all and sundry as a landmark social reform.
But this move is like a two-edged sword, in that it was not just a step towards women emancipation, but also has the potential to generate an additional and steady stream of income for the kingdom’s economy in due course.
According to a research by Ziad Daoud, Middle East economist at Bloomberg Intelligence, the path-breaking decree allowing women to drive is set to boost economic growth, potentially adding about $90bn to economic output by 2030. This is comparable to the estimated income Saudi Aramco’s planned initial public offering could generate. While the gains of this decision may take some time to be realised, greater female engagement in the national labour market is likely to provide a substantial impetus to the total supply of labour, causing GDP to grow faster over the next decade, the analysis states.
Currently, only 20% of women in Saudi Arabia are economically active, and increasing their participation rate is one of the main targets of the ambitious Saudi Vision 2030 programme. The research finds that just adding 1 percentage point to the rate every year could add 70,000 more women a year into the labour market.
While not all of these women may find work, even assuming a structural unemployment rate of 17% for women implies that the growth consequences are considerable. This could lift potential GDP growth by up to 0.9 percentage points a year. Should this be realised, the kingdom’s GDP would be around $90bn larger by 2030 than it would have been if the ban had remained in place.
This amount is similar to what Saudi Arabia is hoping to raise through the scheduled 5% share sale of its most prized possession, Aramco. Surely, this pragmatism shown by the Saudi leadership will pay rich dividends in future.
