Unlocking the Potential of Female Labor Force Participation may boost Saudi Arabia's GDP

Saudi Arabia women inclusion

Improving female labour force participation is having a positive effect on Saudi Arabia’s GDP. According to a report by S&P, the Government’s efforts to diversify the country’s economy have already had some positive impact on female labour and on the GDP.

The report, titled "Economic Research: Greater Share Of Working Women Bolster Saudi Arabia's Economic Growth, Improving Productivity Will Entrench It", notes that the female labor force participation rate in Saudi Arabia has increased from 16% in 2017 to 31% in 2022, and is projected to reach 40% by 2030. This is improving productivity and economic growth.

S&P included a Monte Carlo simulation table that shows a 2.41% increase in GDP if historical trends continue, and an 8.81% increase in GDP if total labor force participation grows 10 percentage points in the next 10 years.

What is driving Saudi Arabia’s GDP

The report obviously cites other factors that are sustaining the growth of Saudi Arabia. Among them the huge investment in education and infrastructure, that enable a long-term economic growth in the country.

But the increase in the participation of women to the labour market is seen as a significant step forward.

Saudi Arabia is trying to diversify its economy and reduce its depence on oil. It perfectly makes sense, given that most developed countries are committed to address the climate change issue, basically tapering off the use of fossil fuels in the next decades.

Vision 2030

The Vision 2030 plan aims at diversifying the kingdom's economy away from hydrocarbons.

Labour reforms, in particular, want to reduce the percentage of illiterate adults and improve the percentage of graduates who have secured employment.

The reduction of the unemployment rate for Saudi nationals is an important objective that will be pursued also by increasing female labour force participation, strengthening technical and vocational training, and enhancing funding for small and medium sized enterprises.

Financial institutions are required to allocate at least the 20% of overall funding to SME and small businesses.

The impact on women conditions

Saudi Arabia’s overall femal labour participation rate grew from 17% in 1999 to 35% in 2022. The percentage includes both nationals and expats, but the data is quite similar if we only look at Saudi women: from 19% in 2016 to 36% in 2022.

But women participation to the labour market is still lagging on the global scale, especially when compared to high-earning countries.

Female labour force participation is often intertwined with educational attainment and fertility rates, both highly depending on a country’s culture.

It is hard to distinguish between cause and effect here, but only the future will tell us if the market reforms in Saudi Arabia will also lead to a cultural change on the role of women in society.