DUBAI, Jan 11: Companies in Kuwait, as well as the UAE, are facing significant challenges in hiring new staff, as squeezed margins and rising business costs are impacting employment levels, according to the latest business sentiment survey.

In Kuwait, employment figures remained stagnant in December, leading to a backlog of unfinished work as companies struggled to keep up with rising demand. Despite these challenges, companies are finding it difficult to allocate resources to hire additional workers due to tighter budgets. Kuwait's unemployment rate stood at 2.03% in 2023, but companies continue to face issues in maintaining staffing levels in line with business growth.

The economic difficulties in Kuwait reflect broader trends across the Gulf Cooperation Council (GCC) region. Companies are combating rising inflation, with Kuwait experiencing the highest inflation rate in the GCC at 2.8% in September 2024. As a result, businesses are under pressure to maintain profit margins, which is affecting their ability to increase staff or provide salary raises. This has been exacerbated by a surge in competition within the region, making it harder to attract and retain skilled talent.

Kuwait, in particular, has seen inflation increase across several key sectors. Housing costs rose by 5.7%, and cultural and entertainment expenses increased by 2.6%. Meanwhile, costs for food and beverages, as well as transportation, also saw slight increases. These rising costs, combined with the challenges of keeping up with business demand, are squeezing companies' ability to afford new hires.

The competition for talent is also escalating, with businesses opting to explore alternative strategies to address staffing shortages. Many firms are increasingly looking to offshoring as a way to reduce costs and maintain competitiveness in the market. By sourcing talent from countries with lower labor costs, companies are managing to cut expenses while still meeting staffing demands.

Despite these struggles, experts are hopeful that staffing conditions in Kuwait and the broader GCC region may improve in 2025. Andrew Parker, economics director at S&P, notes that firms may find it easier to hire additional staff to take advantage of growth opportunities in the new year.

However, experts are cautioning that the cost of doing business remains a significant issue, with companies continuing to grapple with the effects of rising inflation. As businesses work to adapt to these challenges, the hiring landscape in Kuwait and the UAE will remain complex as they balance growth with financial constraints.

Additionally, staffing budgets in Kuwait are under considerable pressure, and companies are increasingly diversifying their talent search to regions with more affordable and skilled workers. The trends indicate a shift toward offshoring functional positions to countries with lower labor costs, which may alleviate some of the strain on hiring efforts.

As businesses in Kuwait and the UAE continue to navigate these economic pressures, companies will need to adapt quickly to the changing employment landscape while ensuring they remain competitive in a tight labor market.