Net disposable incomes in UAE, Qatar decline sharply

UAE, 12 Dec 2006

(By Lucia Dore) DUBAI — In the UAE and Qatar, net disposable incomes have fallen sharply over the last few years despite salary hikes, according to the latest research from GulfTalent.

Even though salaries have increased across the GCC, with Qatar and the UAE seeing the highest increases at 11.1 per cent and 10.3 per cent respectively, the fast pace of inflation almost wipes out any gains. In 2006, the official rate of inflation in the UAE was 8.5 per cent and 7.2 per cent in Qatar, although evidence suggests that it could be higher.

The study also shows that rent accounts for 33 per cent of average household income in Qatar and 30 per cent in the UAE, compared to just 19 per cent in Saudi Arabia. Average rents have increased by 83 per cent in Doha and 60 per cent in Dubai over the last two years. And in the UAE, the ripple effect of the 30 per cent fuel increase that occurred in late 2005 is being felt. "Health and schooling have also become much more expensive, adding to the cost burden for residents," states the report.

In other countries, price rises have been much lower. In Kuwait, inflation is running at 3.5 per cent and in Saudi Arabia inflation is virtually zero. Rents in Saudi cities are estimated to be less than half of those seen in Dubai and Doha. Monthly rent for a two-bedroom apartment in Doha, for example, is estimated to cost $1,930, and in Dubai $1,850. This compares with $860 in Kuwait, $710 in Manama, $700 in Muscat and $680 in Riyadh.

For these reasons, combined with growing employment opportunities in other emerging markets, particularly India, and the weakness of dollar-pegged regional currencies, the Gulf is a financially less attractive destination than it has been in the past, concludes the GulfTalent survey.

Significantly, many expatriates living in the Gulf are reporting that they are unable to make any savings on their salaries. The survey shows that the UAE had the highest reported proportion of non-savers — 43 per cent compared to Saudi Arabia, where only 23 per cent of expats reported accumulating no savings. In the UAE too 7 per cent of UAE-based expats reported that their salaries did not even cover their living costs, forcing them to borrow or live off their existing savings.

As the Gulf becomes less attractive financially, the region is finding it increasingly difficult to attract expatriate professionals, particularly from traditional sources such as India and Jordan, which have been experiencing their own rapid economic growth.

Despite Dubai's rising cost of living however, it remains by far the most preferred destination for expatriates. Some 38 per cent of expatriates moving to the Gulf said they preferred to move to Dubai, against 9 per cent to Qatar, 8 per cent to Saudi Arabia, 5 per cent to Kuwait and 3 per cent to Bahrain and Oman.

Dubai is also attracting a large percentage of "knowledge workers" with MBAs from top business schools such as Insead and also enjoys the highest retention rate in the region, with 78 per cent of current expatriate residents planning to remain there. Oman is the least attractive country for current expat residents, with less than half planning to remain there. The report concludes that while the UAE is financially the least attractive location in the Gulf, it remains popular due to other, non-financial factors that differentiate it from the rest of the region.