Social reform is rare bright spot in Saudi economic gloom

Nouf al-Anzy's new life shows how Saudi Arabia's social reforms are helping its struggling economy. Six months ago she got her first job, one of tens of thousands of women to do so as the government tackles prejudice against female employment.

The 22-year-old high school graduate earns 4,000 riyals a month as a supermarket cashier in central Riyadh. Her family initially objected but now approves, and the income from the job has been transformative.

"I have good money every month and I am not married and have no obligations. I can go to the cinemas, go shopping, dine out, and take computer and English courses to improve myself," she said. "I also plan to buy a car to drive."

Consumer spending by newly employed women like al-Anzy is helping to offset a huge drag on growth from measures to bolster state finances and an exodus of foreign workers.

The extent to which the economy can pick up over the next two years after shrinking last year for the first time since 2009 may depend largely on how much female empowerment and other social reforms can contribute.

Two years after it launched an economic reform program to cut reliance on oil exports, Saudi Arabia has little to show for it. Plans to spur private investment in new non-oil industries, from shipbuilding to robotics, have barely got off the ground, partly because of red tape and legal uncertainties.

Bank loans to private firms have shrunk from a year earlier for 13 straight months, dampened by taxes and fees levied to cut the state budget deficit. Growth in private business activity is the slowest since August 2009, a corporate survey shows.

But social reforms introduced by Crown Prince Mohammed bin Salman alongside the economic steps are underway, and for the next few years at least, they may have more of a positive impact on business than Riyadh's ambitious investment plans.

Mixed picture

Many of the measures have business implications.

Plans for tourist visas will boost the leisure sector, curbs on the power of the religious police may help restaurants by enabling the sexes to mingle over meals out and the economy could also benefit from education and court reform.

Muhammad Alagil, chairman of Jarir Marketing, a top retailing chain, told Reuters rising female employment was one reason for a 13.4% increase in his company's sales last year despite the tough economic times.

“Women entering the workforce is really a strong tailwind for the economy,” he said, noting that a typical Saudi family could more than double its income if the wife and some of her unmarried daughters chose to work.

Measuring the impact on the wider economy is not easy: plans to lift a ban on women driving, which the government says will happen in late June, are a case in point.

In the long run, allowing women to drive will spur industries such as auto parts, auto insurance and by improving the mobility of families, even housing, Alagil predicted.

Over the shorter term, the lifting of the ban on women driving may put tens of thousands of foreign chauffeurs out of work, accelerating a drop in immigrant workers which has hurt the economy.