Employees in Saudi Arabia have seen the highest pay rises this year, with the trend forecast to continue into 2018, according to a new GGC-wide survey.

Conducted by global professional services firm Aon, the study of 600 multinational companies and locally-owned conglomerates found that KSA wages increased by 4.4 per cent, on average, in 2017.

As with last year, actual salary increases remained lower than forecast (4.9 per cent) – predominantly due to a slowing economy and low oil prices – but the predictions for 2018 still hit 4.5 per cent.

Employees in the UAE and Kuwait also fared well in 2017, with an average 4.3 per cent increase. Qatar achieved 4.2 per cent, while workers in Bahrain and Oman received a 3.9 per cent pay increase, on average, this year.

Both Kuwait and Qatar are predicted to see a 4.5 per cent salary increase next year, with estimates for Bahrain and Oman both dipping slightly to 4 per cent and 4.3 per cent respectively.

“Despite lower-than-projected salary increases this year, there is optimism in the region over KSA Vision 2030 and Expo 2020 – with the potential for thriving new industries and a significant level of job creation in the region as a whole,” said Robert Richter, GCC compensation survey manager at Aon Hewitt Middle East.

“With the stabilisation of oil prices, we can also expect the economy to stabilise and strengthen in the coming years,” he said.

Richter believes that GCC countries can still maintain their pull in terms of attracting talent.

“The GCC and Dubai especially will always be important markets for organisations to be in, as they serve as a hub into the Middle East and Africa and remain a safe haven in a volatile region,” he said.

“However, as governments are looking for more revenue streams outside of oil, the GCC countries’ cost of living increases with the reduction in subsidies for fuel and utilities, as well as the introduction of direct and indirect taxes,” continued Richter.

Although 4.2-4.5 per cent salary increases are high relative to Europe or the US, average inflation is expected to hit the same level as or even outpace wages. Additionally, nationalisation policies put more cost pressures on expats such as the dependents tax, or higher service fees for expats in Saudi Arabia and Kuwait, said Richter.

“While there is more business confidence in the region and 2018 is expected to be a much better year, it remains to be seen if many organisations will align their salary increases to these new levels of inflation. The forecast doesn’t indicate that, and for many expats it means the belt will have to be tightened further,” he said.