As COVID-19 affected global supply chains, climate events disrupted food production and agriculture, and geopolitical pressure and turbulence have caused a spike in energy prices. As a result of this, UAE-based expats told Al Arabiya English that they are now changing their spending habits.
This comes as a leading consumer expert warned that Dubai’s “casual spenders” will become victims of the cost-of-living crisis should they not change their spending habits and financial mindsets.
Kate Hardcastle, a British broadcaster and business consultant known for her retail and consumer-related work, told Al Arabiya English: “The cost-of-living crisis is everywhere – from the UK to the US to the UAE; It is incredibly prevalent.
“This has been an issue that has been arising for months for many factors.”
This included a knock-on effect from the COVID-19 crisis, which caused issues in supply chains, weather-related crises hampering crop outputs, and high inflation outstripping wage increases, leading to a fall in “real” disposable incomes in addition to the recent energy crisis.
Hardcastle said, while those with lesser income are usually the victims of the cost-of-living crisis, it is also those who are failing to reign in their spending after “finding freedom” following the COVID-19 pandemic.
“There has been a jubilation after the restrictions from COVID-19 pandemic lifted,” she said. “People feel they were savvy about money and were working from home and not spending during the crisis.”
Now that has ended, many are determined to go back to planning holidays and spending as they would before, said Hardcastle.
“People have a newfound vigor about spending, which makes me think the worst is yet to come with the cost-of-living crisis.
“Originally, the people I was affecting were those feeling the effects of the rising price of fuel and food. That’s because, simply put, food, fuel, public transport and heating a house: That’s a bigger part of a spend if it’s an income that is small. So, if those prices go up you have less to maneuver.
“But now you have another situation. People are saying, ‘I am going on holiday,’ ‘I am having a night out’ – all while heading into increasing costs.”
Hardcastle said this could be especially prevalent in Dubai where the ‘keeping-up-with-the-Joneses’ lifestyle sees people choosing to carry on with lavish spending rather than tightening their belts.
This, she said, will lead to a “paradigm shift of people dipping into their savings rather than pressing forward with their savings goal” and ultimately facing “really challenging times” in the future.
Hardcastle said this can be avoided by people being “financially-open” about their saving goals to friends and family.
“In a lot of cultures all over the world, it is not the status quo to talk about finances – such as the British ‘stiff upper-lip.’ People will still shove bills metaphorically into drawers. It’s an embarrassment factor.
“The cost-of-living crisis is an absolute undeniable present issue in our times created by a storm of issues that is not the consumer’s fault. However, consumer habit, social media, the pressure to fit in, the mental habits of many of us… it is not helping.
“The cost-of-living crisis is against a backdrop when you have a constant need to perform, go to the latest brunch, go on holiday… but there comes a point when we need an open conversation.
“We need to treat finances with respect -- most people do not give it the time of day. They will never put time down with bills at home. I understand -- the fear of addressing finances is overwhelming -- but some people cannot be bothered. Be friends with your finances and over time it will pay you back in droves.
“Remember; if you have to ask the price, often you cannot afford it.”
Arnab Ghosh, a 45-year-old Indian expatriate, has lived in Dubai for decades and has watched the prices of food, rent and services creep up.
“I've been here since the era of free parking across the (much smaller) city -- across the nation, for that matter.
“There was a time when a falafel sandwich cost a Dirham, and a shared taxi ride from Dubai to Sharjah would cost AED 4.
“Coming back to the 21st century given the aftermath of the restrictions due to COVID-19, and recent world events, prices were bound to go up.
“COVID-19 drove Europeans to seek a second home in Dubai. Starting from Q2 last year, that resulted in a surge in the sales (and consequently the prices) of luxury real estate. The rest of the market followed suit, piggybacking on the advent of Expo 2020.”
Rents went up, further aided by the introduction of new visa categories, one of which was for expats working in other countries being able to live in Dubai.
“Real estate and fuel prices, combined with the rising cost of logistics since last year, have had a direct impact on the cost of living, with prices of basic commodities rising to meet the higher operating costs of doing business.
“I'm not sure how exactly, but in some manner this is reminiscent of 2008-09: After a sharp rise in the cost of living, it all nose-dived.”
Lebanese expat and Dubai-based educator Lynn Habbal, 30, told Al Arabiya English that the rise in living costs has been affecting her livelihood lately.
“The rising cost of living here is beginning to take a toll on my livelihood. At first, it did not seem to be the case, a dirham or two difference at the grocery store, or the slight raise in gas prices wasn’t a big deal.
“Now, as the items in my grocery bag are getting lighter, the purchasing amount is getting higher. Now, long distances have become a serious issue to consider in choosing where I live or work or spend my free time.
The rise in fuel prices have affected her mobility, as she has recently been reconsidering longer trips that would require more gas.
“[The rise in] fuel costs have impacted my mobility drastically. It’s unfortunate for me too, since employers aren’t likely going to raise the transportation allowance.
“I do consider finding a job in a country less expensive than UAE, but I’m limited with my options, it’s not easy finding a place I could call home -- not even my own country can be called home due to the political and economic situation.”
Brazilian expat and Dubai-based business owner Nicole Gurgel, 29, who has lived in the UAE for most of her life, told Al Arabiya English she has observed an increase in prices and that it has been affecting her day-to-day business expenses for her e-commerce business.
“Yes, the prices of food have increased, the price of petrol has increased and the rent prices are starting to go up again so it’s been a bit of a hit on all sides,” said Gurgel.
“I have not considered moving back to my home country because the UAE is home for me and even with this cost-of-living crisis, it’s still better than living back in Brazil due to the safety and opportunities that we get here.”
“The highest price increase is definitely petrol. Given that we are in a city where we have to drive everywhere, the petrol prices affect everything, like the cost of shipping – which as a business owner, I have to work with on a daily basis.
“All the deliveries and commuting has become a lot higher than what it used to be.”
Echoing Gurgel’s sentiment, 31-year-old communications consultant and Malaysian expat Shalini John said that she was “definitely feeling the impact” of the increased cost of living.
“The hike in fuel prices recently... it has almost doubled in the last two years. As a subsequent result of this, the price of goods has also increased. As an expat living in Dubai, we were used to living a certain lifestyle, we’re worried that might change now.”
“The highest price increases I observed recently were mostly fuel price hikes and things like groceries and daily necessities.”
The Malaysian expat said that despite the spike in food and gas prices, she was not planning to move back to her home country any time soon.
“We love Dubai and appreciate the opportunities we have here, but it is concerning. We will have to evaluate the situation in the next few years.”
UAE companies are also seeing consumer patterns shift with the cost-of-living crisis.
Soham Shah, CEO of Selfdrive.ae, said, with the cost of cars going up and the recent hike in fuel prices, consumer patterns for commuting and need for transportation are seeing a shift.
“Companies and individuals have already started opting for on demand car rentals as against purchasing given the surge the overall cost.Since the past month, we have witnessed an increase in car rental reservation by 30 percent.
“This is mainly because on demand car rental offers one stop cost -- all-inclusive services such as insurance, maintenance, tires, batteries & even replacement in case of a damage, which serves as a great convince to manage cost of living as you are in total control over the monthly cost.”
Patthama Chaklang, from Cafe Isan in Dubai, said both businesses themselves and their customers are feeling the pinch.
“Real time increases are about 25 percent to 30 percent with fixed and variable costs both going up. We’re seeing increased weekend business but a slight drop during weekdays, possibly due to a change in consumer habits but it’s too early to be sure.”
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