29 September 2011
KUWAIT: Kuwaiti residents have grown fonder of saving money over the past few months, according to a new National Bonds GCC Savings Index study. The study, released earlier this week, found that more people than previously in Kuwait, Saudi Arabia and Oman have taken to regularly saving money during 2011, whilst Qatar has shown the largest decline in regular saving in the region during the same period. Across the GCC as a whole, however, 64 percent of respondents said that they save less than a fifth of their salary each month.
For the Omani respondents, recent changes included increased spending on groceries, utilities and dining out at restaurants, but less expenditure on luxury goods and international travel. Kuwait, however, saw an increase in levels of international travel this year, with a Directorate General of Civil Aviation (DGCA) report noting a three percent increase in travel during the month of May as compared with 2010, followed by an eight percent increase in June. The expenses Kuwaitis are cutting back most on, according to Kuwaiti national Aicha Al-Faraj, are costly restaurants, and designer clothing and accessories, although she added that "there's also extreme budgeting on groceries.
Groceries appear to be an expenditure set to continue rising in cost as inflation carries on increasing, according to Kuwaiti economist, Hajjaj Bukhadour, who said that the study's findings aren't an indication that Kuwaitis are making any specific efforts to save money: "Kuwaiti nationals are allocated a certain amount of food free of charge to cover the needs of basic foods," he explained.
This can reduce the impact of paying for the more expensive goods, as they don't have to rely on them fully and get considerable support in alleviating expenses on groceries. This can certainly assist in helping with savings." Bukhadour added, "The impact of the rising cost of groceries will hit expatriates more, because they don't have this support to offset the increasing inflation.
The economist further noted that the KD1,000 gifted to every citizen by HH the Amir earlier this year to mark the fiftieth anniversary of Kuwaiti independence, along with significant increases in public sector workers' salaries, may have contributed to an increased desire among Kuwaitis to save. However, he pointed out, given that credit and loans are often used to fuel spending, it seems odd that Kuwaitis' enthusiasm for saving has suddenly increased. This, according to Bukhadour, is down to new limitations, "The Central Bank has put a limit on spending on credit cards; you cannot spend in credit higher than the value of 40 percent of your salary each month," he revealed.
Aicha has also noted changes in credit management, "Credit helps these days because you can always manage by setting limits on your cards, as well as making sure your card deducts from an account with limited cash instead of your savings account. There's always a way if you're not too reckless.
However, attitudes are a vital consideration, as the Index uses attitudes to determine changes in sentiments towards saving. Aicha said, "I believe that people smartened up after the economic crisis [of 2008], since it was so hard to get a job. Some people were dismissed, and a lot of people didn't have money saved for trying times.
She added, "Another central factor is that real estate is extremely expensive these days, so people are more likely to save so they can buy a house or even pay their rent rather than be in endless debt." This may well explain the study's finding that 63 percent of Kuwaiti respondents said they intended to start saving or increase the amount they regularly save in the next 6 months.
Bukhadour, however, insisted that the changes are a result of the additional support received, as opposed to any real sea-change in Kuwaitis' attitudes, "It's not because of attitude or philosophy, but because there are so many supportive measures, which makes it easier," he asserted," warning, "but it isn't safe to assume that such measures will be continuous.
The economist continued, "I'd estimate that this [support] will be reduced next year, because government support will change and the demands for higher salaries will fuel inflation further. Kuwaitis will suffer next year because they won't receive as much support as they did this year, and they aren't prepared for such changes yet.
According to Bukhadour, the key to encouraging regular saving lies in the mentality and attitudes of society, "A salary should be considered as an investment, it should be used as a tool of development, a tool of saving. It is important that people see their salaries differently. The culture and values in Kuwait dictate that salaries are for consumption alone." He continued, "Salaries are for achievements, not just for being present at the job.
If they are more achievement-based, it will encourage people to work harder, which will improve values and thus encourage people to save and spend responsibly." Kuwaiti national Sara commented, "There isn't pressure to save from your salary because you live with your family until marriage, so the only expenses for many are entertainment.
The study found that 8 percent of Kuwaiti respondents use gold as a savings instrument and, should positive sentiments towards saving continue to rise, Bukhadour indicated that it's a good investment, "Gold can rise and fall in value, but the overall direction of it is on the up. If you have to spend on luxury goods, at least spend on gold because it's valuable and will bolster your savings because it can be sold later. Most other luxury products, however, depreciate in value rapidly.
KUWAIT: Kuwaiti residents have grown fonder of saving money over the past few months, according to a new National Bonds GCC Savings Index study. The study, released earlier this week, found that more people than previously in Kuwait, Saudi Arabia and Oman have taken to regularly saving money during 2011, whilst Qatar has shown the largest decline in regular saving in the region during the same period. Across the GCC as a whole, however, 64 percent of respondents said that they save less than a fifth of their salary each month.
For the Omani respondents, recent changes included increased spending on groceries, utilities and dining out at restaurants, but less expenditure on luxury goods and international travel. Kuwait, however, saw an increase in levels of international travel this year, with a Directorate General of Civil Aviation (DGCA) report noting a three percent increase in travel during the month of May as compared with 2010, followed by an eight percent increase in June. The expenses Kuwaitis are cutting back most on, according to Kuwaiti national Aicha Al-Faraj, are costly restaurants, and designer clothing and accessories, although she added that "there's also extreme budgeting on groceries.
Groceries appear to be an expenditure set to continue rising in cost as inflation carries on increasing, according to Kuwaiti economist, Hajjaj Bukhadour, who said that the study's findings aren't an indication that Kuwaitis are making any specific efforts to save money: "Kuwaiti nationals are allocated a certain amount of food free of charge to cover the needs of basic foods," he explained.
This can reduce the impact of paying for the more expensive goods, as they don't have to rely on them fully and get considerable support in alleviating expenses on groceries. This can certainly assist in helping with savings." Bukhadour added, "The impact of the rising cost of groceries will hit expatriates more, because they don't have this support to offset the increasing inflation.
The economist further noted that the KD1,000 gifted to every citizen by HH the Amir earlier this year to mark the fiftieth anniversary of Kuwaiti independence, along with significant increases in public sector workers' salaries, may have contributed to an increased desire among Kuwaitis to save. However, he pointed out, given that credit and loans are often used to fuel spending, it seems odd that Kuwaitis' enthusiasm for saving has suddenly increased. This, according to Bukhadour, is down to new limitations, "The Central Bank has put a limit on spending on credit cards; you cannot spend in credit higher than the value of 40 percent of your salary each month," he revealed.
Aicha has also noted changes in credit management, "Credit helps these days because you can always manage by setting limits on your cards, as well as making sure your card deducts from an account with limited cash instead of your savings account. There's always a way if you're not too reckless.
However, attitudes are a vital consideration, as the Index uses attitudes to determine changes in sentiments towards saving. Aicha said, "I believe that people smartened up after the economic crisis [of 2008], since it was so hard to get a job. Some people were dismissed, and a lot of people didn't have money saved for trying times.
She added, "Another central factor is that real estate is extremely expensive these days, so people are more likely to save so they can buy a house or even pay their rent rather than be in endless debt." This may well explain the study's finding that 63 percent of Kuwaiti respondents said they intended to start saving or increase the amount they regularly save in the next 6 months.
Bukhadour, however, insisted that the changes are a result of the additional support received, as opposed to any real sea-change in Kuwaitis' attitudes, "It's not because of attitude or philosophy, but because there are so many supportive measures, which makes it easier," he asserted," warning, "but it isn't safe to assume that such measures will be continuous.
The economist continued, "I'd estimate that this [support] will be reduced next year, because government support will change and the demands for higher salaries will fuel inflation further. Kuwaitis will suffer next year because they won't receive as much support as they did this year, and they aren't prepared for such changes yet.
According to Bukhadour, the key to encouraging regular saving lies in the mentality and attitudes of society, "A salary should be considered as an investment, it should be used as a tool of development, a tool of saving. It is important that people see their salaries differently. The culture and values in Kuwait dictate that salaries are for consumption alone." He continued, "Salaries are for achievements, not just for being present at the job.
If they are more achievement-based, it will encourage people to work harder, which will improve values and thus encourage people to save and spend responsibly." Kuwaiti national Sara commented, "There isn't pressure to save from your salary because you live with your family until marriage, so the only expenses for many are entertainment.
The study found that 8 percent of Kuwaiti respondents use gold as a savings instrument and, should positive sentiments towards saving continue to rise, Bukhadour indicated that it's a good investment, "Gold can rise and fall in value, but the overall direction of it is on the up. If you have to spend on luxury goods, at least spend on gold because it's valuable and will bolster your savings because it can be sold later. Most other luxury products, however, depreciate in value rapidly.
© Kuwait Times 2011
