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UAE Consumer Confidence Held Steady In Q2 2018

VAT UAE tax

Levels of consumer confidence hold steady in the UAE, despite a slightly larger number of residents reporting that they are struggling to make ends meet.

Levels of consumer confidence held steady in the UAE during the second quarter of 2018, despite a slightly larger number of residents reporting that they are struggling to make ends meet, according to yallacompare’s Consumer Confidence Tracker for Q2.

The Q2 2018 tracker is based on a survey of 1,347 UAE residents, and follows on from the Q1 tracker that polled 1,441 residents. By tracking responses across quarters, yallacompare, the Middle East’s leading comparison site, aims to create an accurate picture of how consumer confidence is evolving in the UAE.

The Consumer Confidence Tracker Q2 2018 reveals that 41.2% of UAE residents are less confident about their financial health than they were this time last year. That compares to 42.9% of UAE residents who said the same thing during the first quarter of the year. As was the case in Q1, just over 19% of UAE residents are currently more confident about their financial health than they were 12 months ago.

These steady levels of consumer confidence come despite the fact that more UAE residents reported struggling to make ends meet during Q2 2018 than in the first quarter of the year. The tracker found that 13.9% of UAE residents are now struggling to make ends meet as a result of cost increases related to the introduction of value-added tax (VAT) in the UAE. That’s compared to 11.9% who said the same thing in the first quarter of the year.

The majority of respondents (52.2%) in Q2 said that they are getting by, but have had to make spending cuts as a result of the introduction of VAT. In Q1, 58.3% said the same thing. Those who have barely noticed costs going up because of the 5% tax, meanwhile, made up 30.9% of respondents in Q2, compared to 29.8% in Q1.

“The additional people who reported that they are struggling to make ends meet in Q2 were made up almost entirely of those who were managing to get by, despite making spending cuts, in the first quarter of the year. This suggests that the increased costs of living associated with the introduction of VAT are hitting some UAE residents harder than was likely envisioned,” said Jonathan Rawling, CFO of yallacompare.

Despite the increased cost of living affecting more people, expat UAE residents reported that they are no more likely to leave the UAE due to their finances than they were in the first quarter of the year. The tracker found that only 22.8% are more likely to leave the UAE (24.4% in Q1), and 41.5% are less likely to leave (42.2% in Q1). This suggests that UAE expats are still more confident about their relative prospects in the UAE than in their home countries.

This could be explained by the fact that job prospects improved for UAE residents during the second quarter of the year. Almost 35% of respondents reported seeing a salary raise over the past 12 months, compared to less than 30% during the first quarter. Overall job confidence increased by 4.4 percentage points quarter-over-quarter, and job security increased by 5.4 percentage points.

“This could lead to a softening of the pressures that consumers are facing – indeed, we may be starting to see the light at the end of the tunnel. A raft of new stimuli from the government, announced during the quarter, has likely boosted business confidence, which may allow employers to begin matching salaries to the increased cost of living,” said Rawling said.

“And while slightly more respondents said that they are struggling to make ends meet, levels of debt are falling, and there has been an increase in remittance rates. This suggests that the way consumers were allocating their resources in the first quarter of the year may be changing again. People are paying down their debts and sending more money home.”

In terms of remittances, 36.8% of respondents are now sending more money home than they were last year, compared to 30.6% in the first quarter of the year. And in terms of debt, 48% reported having less credit card debt now than they did 12 months ago, compared to 42.4% who said the same thing in Q1 2018. And in regards to loan debt, 50.3% reported having less debt now than 12 months ago – compared to 46.8% who said the same thing in Q1 2018.

As was the case in the first quarter of 2018, contrary to perceived wisdom, UAE residents are not, on the whole, benefitting from the reported softening of the country’s property rental market. Just 20.4% are currently paying less in housing rent than they were 12 months ago, compared with 19.6% who said the same in Q1. Just 9.9% have moved to bigger homes, but 38.6% are currently paying more in rent than they were 12 months ago. This suggests that property rental prices continue to rise – at least in certain areas.

Elsewhere, UAE parents continue to struggle with the increasing cost of school fees. As was the case in the first quarter of the year, over 80% are paying more in school fees than they were 12 months ago.  And the number of parents who would consider sending their child to a different school in order to save money on fees has increased by 7.7 percentage points quarter-over-quarter.

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