The GCC states are undergoing a rapid transformation in the management of their public finances, as oil revenues retreat from their role as the near-exclusive engine of government spending and as policies aimed at rationalizing subsidies and expanding non-oil revenues gain prominence. These shifts—of which Bahrain offers one of the clearest examples—have reordered public spending priorities, while simultaneously pitted GCC citizens up against challenges of low income, weak purchasing power, and a rising cost of living.
Volatility in energy markets and declining oil returns have pushed GCC governments to adopt reform packages that affect the core of the public subsidy system and redraw the economic relationship between the state and citizens. In this context, Bahrain has announced a series of measures that include raising fuel prices and electricity and water tariffs, increasing the contribution of state-owned companies to the budget, cutting administrative expenditures, and moving toward the introduction of an income tax on local companies.
According to figures released by the GCC Statistical Center in April 2025, the housing sector recorded an increase of 5.3 percent, goods and services rose by 3.4 percent, education by 1.0 percent, food and beverages by 0.9 percent, restaurants and hotels by 0.8 percent, health by 0.6 percent, and clothing and footwear by 0.1 percent.
Although Bahrain is an oil-producing country, the limited scale of its resources compared with its GCC neighbors, along with lower global prices, has intensified pressure on its public finances. This has driven Manama to work on diversifying income sources and supporting alternative sectors such as tourism, financial services, and logistics. These strategic shifts, however, have coincided with a tangible rise in living costs, affecting energy prices and basic services, at a time when challenges related to income levels and employment opportunities persist.
Dr. Ahmed Al-Khazaai argues that the steps taken by Bahrain “fall within a broader context of governments’ attempts to get a grip of their finances.” He notes that raising fuel and electricity prices is primarily intended to reduce deficits and ensure the sustainability of public budgets amid declining oil revenues and growing obligations.
According to Al-Khazaai, these policies “do not represent an exceptional case, but rather reflect a global pattern of restructuring subsidies and directing them toward the neediest segments while reducing waste in public spending.” He explains that “artificially low prices lead to excessive consumption and high costs borne by the state, whereas price liberalization helps rationalize consumption and eases pressure on public finances, opening space for investment in more sustainable productive sectors.”
At the same time, Al-Khazaai points out that the real challenge “does not lie in the logic of reform itself, but in how to strike a balance between fiscal discipline and not over burdening citizens,” particularly amid a slowing global economy and declining income and purchasing power.
He stresses that the success of any reform policies remains contingent on “the existence of strong social safety nets, such as direct support for low-income groups or compensatory programs that mitigate the impact of rising prices.” He emphasized that implementing reforms “in a gradual and judicious manner” can strengthen fiscal sustainability and reduce social risks.
Wages and Unemployment: Numbers That Reveal a Fragile Balance
A cross-reading of unemployment data, national employment growth, and minimum wage levels in the GCC paints a complex picture that cannot be separated from the realities of daily life for citizens. According to the GCC Statistical Center, Saudi Arabia recorded the highest unemployment rate among GCC countries in the fourth quarter of 2024 at 3.5 percent, compared with 0.1 percent in Qatar, the lowest in the bloc. The total number of citizens employed across the GCC reached about 5.5 million men and women, with annual growth of 2.7 percent.
The data showed that Saudi Arabia accounted for roughly 73.9 percent of the total number of employed citizens in the GCC states, followed by Oman at 15.6 percent, then Kuwait and Qatar. An increase of about 143,000 male and female workers was recorded compared with the fourth quarter of 2023, against a slight decline in Kuwaiti employment.
Trading Economics data for 2025 reveal even clearer disparities in labor market conditions. Unemployment stood at 0.1 percent in Qatar, 1.5 percent in Oman, 2.1 percent in Kuwait, 2.13 percent in the United Arab Emirates, 3.4 percent in Saudi Arabia, and 6.3 percent in Bahrain—the highest in the Gulf. Yet these indicators, despite their importance, do not on their own capture the scale of economic pressure unless read alongside minimum wage levels.
In Saudi Arabia, the minimum wage for citizens in the private sector stands at about 4,000 riyals per month (around $1,066). The UAE has decided to introduce a minimum wage starting in January 2026 of 6,000 dirhams (about $1,633). In Kuwait, the legal minimum wage is about 750 dinars (around $2,435), while Qatar has set a minimum of 1,000 riyals ($274), in addition to housing and food allowances. Oman has set the minimum at 325 riyals ($844), and Bahrain at 300 dinars ($795), with different pay scales for public employees depending on qualifications.
These figures indicate that low unemployment does not necessarily translate into improved living standards, amid a widening gap between nominal incomes and the costs of daily life.
The Income–Cost of Living Gap: Local Pressure, Global Drivers
Against the backdrop of inflation and volatility in energy and food prices, the gap between income and the cost of living has emerged as one of the most prominent economic and social challenges in the Gulf. Economic expert Khalfan Al-Touqi believes this gap is “likely to become clearly visible in a number of GCC countries,” with its severity varying depending on the adopted policies. He explains that “the absence of support programs such as subsidies for petroleum, electricity, water, and basic foodstuffs leads to the widening of a real and tangible gap between income and living costs.”
Al-Touqi warns that the risks associated with this gap increase amid unemployment rates that are likely to rise, driven by the steady growth in the number of graduates. This has prompted some governments to adopt wage-reduction policies in an effort to absorb as many job seekers as possible and enhance competitiveness. He stresses, however, that “competitiveness cannot be achieved through wage cuts in isolation from accompanying policies,” arguing that any decision to reduce wages must be part of “an integrated process accompanied by clear support packages for key sectors.”
Al-Touqi compares GCC countries, distinguishing between those “where the gap will become stark due to the absence of an integrated approach and social protection systems,” and others that have succeeded in limiting its impact by combining support for essential sectors with protection schemes targeting the most vulnerable groups.
For his part, Al-Khazaai offers a more structural reading, viewing the gap as a reflection of economies that rely heavily on imports while possessing limited capacity in domestic production lines to generate added value. He explains that GCC economies “remain exposed to global price fluctuations, particularly in food, energy, and logistics services,” creating a persistent divergence between citizens’ incomes and their daily living costs.
Al-Khazaai argues that these pressures have been exacerbated by geopolitical crises and wars, which have disrupted maritime corridors and driven up insurance and shipping costs, directly feeding into the prices of imported goods. He concludes that the income–cost of living gap in the GCC countries “has become as much a direct reflection of global challenges as it is a product of local policies,” in economies where imports constitute a fundamental pillar in meeting domestic demand
Sukina Ali
A Saudi writer, researcher, and TV presenter
