It's fair to say that, ahead of the introduction of value-added tax (VAT) at the beginning of 2018, UAE consumers were a little worried about the impact that an extra 5 per cent on the cost of goods might have on their finances.
In fact, at the end of 2017, we conducted a survey asking users of our UAE site how they felt about the introduction of VAT. When the results came in, over 44 per cent said that they were worried they wouldn't be able to afford the rising cost of living that VAT would bring about. In fact, only 3.6 per cent said they weren't worried at all about the prices going up as a result of VAT.
Now, that survey was taken in December last year, so no one could have really known how VAT was going to affect them. And happily, the worst fears around the introduction of VAT appear not to have been realised.
Earlier this month, we introduced our first quarterly Consumer Confidence Tracker. It was a survey of over 1,400 UAE residents, designed to take the financial pulse of the nation during the first quarter of 2018. And one of the main headlines was that only 12 per cent of people feel that the impact of VAT has been such that they're now struggling to make ends meet. In fact, almost 30 per cent said that they'd barely noticed the increase in prices.
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So, the introduction of VAT wasn't as bad for UAE consumers as they thought it would be. But the tracker did reveal an increased sense of cautiousness among residents when it comes to their finances.
In fact, it found that almost 43 per cent of UAE residents are less confident about their finances than they were last year. It also found that more people are less confident about keeping their jobs in 2018 (compared to the last quarter of 2017), and slightly fewer people expect a salary raise this year.
So how's this impacting behaviour? Well, in short, many people are now sending less money home in remittances, and putting less money away in savings accounts. The good news, however, is that more people are apparently using that money to pay down debts from loans and credit cards; almost half claim to have less debt now than they did last year.
Really, what we're seeing is UAE residents allocating their resources differently, based on their confidence levels.
Rather than sending money home, they're paying off credit cards, and rather than moving to bigger properties, they're staying put in the homes they already have. We can actually infer a greater level of financial prudence, which, as the owner of a financial comparison site, I couldn't be happier to see.
It isn't all doom-and-gloom, either. While UAE residents generally accept that the cost of living is rising, over half are only slightly worried about not being able to afford the increases, and believe that they'll manage to get by. And while the number of people who expect a salary raise has dropped since the fourth quarter of 2017, the vast majority (over 60 per cent) still feel pretty confident that they will see a raise this year.
Here's another positive: because of the demographic make-up of the UAE's population, the majority of our respondents were expats. And despite the increased lack of consumer confidence compared to last year, the vast majority of our expat respondents (over 75 per cent) said they plan to stay in the UAE, rather than return home. It appears that, overwhelmingly, UAE expats are much more confident about their chances of seeing financial success in the UAE than they are of their chances in their home countries.
Is consumer confidence slightly down? Our research suggests that it is. But UAE residents aren't taking that as a cue to leave; indeed, they're simply taking prudent steps to ensure they aren't stung by any financial issues. That sounds like a mature and healthy consumer market to me.
By Jon Richards
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