UAE Expats Clearing Debts Rather Than Spending Following VAT Imposition

Ahead of the recent VAT introduction into the UAE, both expat and citizen consumers were worried about its effect on prices.

A survey conducted late in 2017 by a major English language UAE newspaper saw 44 per cent of respondents saying they had cause for concern over price rises due to the 5 per cent VAT tax, with only around four per cent saying they weren’t worried at all. According to the same media outlet’s Consumer Confidence Tracker, its first survey reported just 12 per cent of consumers were experiencing financial difficulties due to the 5 per cent increase in prices and 30 per cent weren’t affected. However, an increase in caution as regards spending seems to be the result of the VAT introduction.

As a result of the latest survey, it’s now apparent that, although VAT wasn’t causing serious financial difficulties, it has made 43 per cent of residents in the UAE lose at least some confidence in their financial situations. More are worried about keeping their jobs, and a number aren’t expecting a salary increase during 2018. These concerns are affecting behaviour, in that remittances to the home country are in decline and fewer people are adding to their savings accounts. According to banks, more borrowers are attempting to pay down credit card and loan debts, with more than 50 per cent saying they’ve reduced their debt levels over the past months.

One interesting demographic of the survey was that the vast majority of respondents were expatriates working in the UAE. Some 75 per cent of expats said they were planning to stay in the UAE rather than move on or go back to their home countries. This would indicate the majority of expats see a better financial and job-related future in the UAE than at home, even if their consumer confidence levels aren’t as high as they would like. In all, it seems the UAE’s expats are heading towards a healthy and mature attitude towards consumerism.