According to Arabian Business, which reported on the figures in Mercer's annual remuneration survey, salary increases in 2016 are likely to fall below 5% in the UAE and Qatar for the first time in five years. Both are predicted to be 4.9%, Arabian Business said.
Saudi Arabia is expected to see increases of around 5%, down from the 6% rises in recent years, Arabian Business said.
The report blames the low price of oil, a struggling financial market in the region and political volatility for the slowing salary increases, the news site said.
Companies are also reducing their hiring plans, the agency said, according to Arabian Business. Only 57% of organisations planned to increase headcount in 2016, compared to 71% the year before.
"There is no doubt that 2015 has seen one of the biggest shifts in economic momentum in the Middle East in recent years," Nuno Gomes, information solutions business leader at Mercer Middle East, said. "The rapid decline in oil revenue is having a significant impact on the growth plans for businesses in the region."
"It is clear that 2016 is likely to be characterised as a year of restrictions, caution and a focus on improved efficiency from an HR, compensation and benefits perspective. Companies are looking to introduce new and interesting approaches to rewards, and benefit from the macro-economic environment to make necessary or desirable changes," he said, according to Arabian Business.
Fiscal and current account balances in the GCC region are deteriorating sharply, with the fiscal balance projected by the IMF to be in a deficit of 12.7% of GDP in 2015. Growth is also expected to slow, with IMF projection suggesting 3.2% in 2015 and 2.7% in 2016, compared to 3.4% in 2014.