Saudi Arabia - demographic trends to watch for (page 1 of 2)

1. Population growth has declined and will decline further

Population growth in Saudi Arabia has been erratic. It grew at 3.32% from 1950 to 1974, then peaked in the 1970s and 80s at around 6% per annum - mainly due to the influx of expatriates; since then, it has drastically slowed down (2.75% as per Census 2004).

The dip is mainly due to a decreased influx in the expatriate workforce, but the rate of population growth amongst Saudis has also declined (from 3.87% in 1992 to 2.49% in 2004).

The decline amongst Saudis can be explained by an interplay of factors: increased urbanisation, improved literacy levels amongst females, and openness to the modern world through satellites and of late through the internet. All these factors have a proven negative correlation with population growth.

In the long run, this downward trend is likely to continue. Population is expected to grow at 2.07% over the next decade, after which it will significantly decline to around 1.54% during 2015-2025.

But I think it worth noting that all these forecasts are extrapolations from past data, and that introduces a bias. The growth in modernisation will actually push fertility down further (and faster) than these figures suggest.

2. Population concentration

Saudi Arabia covers a huge swathe of land; in fact with an area of more than 2.1 million square miles, it covers 80% of the Arabian Peninsula.

Almost half of it is of course uninhabitable; hence there is a very high concentration of population in some areas. Out of 119 cities listed in the Census 2004:
• 80% of the population lives in 31 cities (26% of total 119)
• more than half the population is concentrated in seven cities
• Riyadh and Jeddah alone account for around one-third of the total population

3. Expatriate population is likely to decrease

An important characteristic of the resident Saudi Arabian population currently is more than six million expatriates. They have an even higher population concentration; more than half live in the two main cities - Riyadh (28%) and Jeddah (23%).

Since the 1992 Census, the expatriate population has been stagnant at 26% of the total population and this is likely to reduce or at best remain static. The decrease is not in absolute numbers, but relative to the total population. A key question is why?

4. Overwhelmingly young population

The answer lies in perhaps the most pronounced feature of the Saudi national demography - its overwhelmingly young population. More than 41% of the population is under 14 years old, another 18% is aged between 15-24 years. The flipside is that it represents an unusually fast expanding labour force - growing at around four percent a year (the labour force will grow based on the historic population growth).

This would have been a godsend in any developed country, as it replenishes the private sector and drives economic growth. For Saudi Arabia, however, it is the big challenge. Unemployment is high - estimates vary from 11% by the Saudi government to 25% by the US Department of State. This high unemployment is perplexing given the literacy rate amongst Saudis males (85%) and females (75%). Part of the reason is two fold:

1) As the result of relaxed immigration policies in the past, companies shopped for the cheapest labour around the world (of which there was no dearth) at the expense of hiring locals.