RIYADH:According to the latest Monster Employment Index (MEI), Saudi Arabia witnessed record growth of 30% in the consumer goods industry in Q4 2017. This was in advance of the introduction of a 5% percent VAT on most commodities and services.
On Jan. 1, the Kingdom of Saudi Arabia imposed a 5% tax as part of its economic diversification efforts to broaden its investment base and boost state revenue, reducing its dependency on oil-based income. The increase in the consumer goods industry can be attributed to the Kingdom’s large population taking advantage of pre-tax prices by stocking up on products and supplies.
Commenting on the most recent Q4 2017 MEI, Sanjay Modi, managing director, Monster.com, APAC & Middle East, said: “We are not surprised at the results of the latest Monster Employment Index, given that the final VAT law in Saudi Arabia was passed at the end of July last year. We have been anticipating an increase in consumer spending before the tax came into effect at the start of 2018.
“The large population of the Kingdom has been stockpiling on products and commodities before the price-hike, a trend that we have seen in other GCC countries like the UAE. We have also seen businesses take advantage of the upcoming tax by launching promotions and sales to encourage customers to buy now, before the VAT comes into effect.”
A selective commodity tax was already implemented by the Saudi Arabian government in June 2017, which imposed a 100% tax on tobacco products and a 50% tax on carbonated drinks. The decision made Saudi Arabia the first country in the GCC to enforce an excise tax as part of its reform program.
“We started to witness signs of a surge in the consumer goods industry when the ‘sin’ tax was imposed during Q3 of last year. There were reports of suppliers struggling with the increased demand, as consumers attempted to stockpile on boxes of cigarettes and carbonated drinks before the price doubled.
“Of course, this type of panic buying would significantly impact the industry, acting as a catalyst to an already active consumer society. It will be interesting to see how positively VAT impacts the market in the longer term, cutting across the industry sectors,” added Modi.
Other industries to show growth from Q4 2016 were healthcare and engineering (including construction) recording growths of 29% and 20% respectively, followed closely by BFSI at 17%. Industries to suffer from a decline in the Kingdom, from the same period last year, include oil and gas and production (including manufacturing) at 3% and 1% respectively.
Occupations showing growth from the same period last year consist of marketing (including arts and creative) and engineering (including production) showing increases of 23% and 13% respectively. Among the occupations analyzed by the MEI, purchasing (including logistics and supply) recorded a decline of 13% while finance (including accounting) remains unchanged.
