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Businesses in the UAE are worried about the cost-of-living crisis, sustained high inflation and severe commodity price shocks, according to a new report.
The issues have been cited as the three biggest short-term critical threats to UAE business continuity and economic growth by a panel of executives, the latest research, published on Monday by the World Economic Forum (WEF) in partnership with Marsh McLennon, said.
The report is based on interviews with more than 12,000 executives and views of more than 1,200 global risk experts, policymakers and industry leaders from 121 economies.
UAE respondents who participated in the survey also cited geopolitical contestation of resources, geoeconomics confrontation and failure of cybersecurity measures as among the major risks that are most likely to pose the biggest threat to the country in the next two years.
The WEF report indicates that UAE businesses face “very real risks” that stem from a prolonged cost-of-living crisis that include spiraling supply chain costs, soaring wages and a collapse in consumer spending power.
Businesses also fear the impacts of sustained high inflation and a fall in public sector investment, alongside shortfalls in public goods and human capital.
“For the majority of UAE executives interviewed, the ‘new normal’ that followed the COVID-19 pandemic brings a lingering fear of economic collapse as a result of a convergence of inflationary, debt and supply chain risks,” said Brad Simpson, Risk Management Leader for MENA at Marsh.
“[The report] also clearly shows that the pandemic has deeply impacted short-term risk concerns related to asset bubbles and resource-related geopolitical instability. These factors – alongside cybersecurity fears and climate action failure, paint a picture of unease and uncertainty across the national economy.”
The UAE’s non-oil private sector growth slowed for a second consecutive month in December, while global economic concerns weighed on business confidence, according to another survey.
The seasonally adjusted S&P Global UAE Purchasing Managers’ Index (PMI) dropped to 54.2 in December from 54.4 in November. According to S&P, the “weakness in the global economy” had led to “a first decrease in new export business since August 2021”.
Mitigation measures
To address the concerns, the WEF report urged UAE businesses to adopt a range of mitigation measures, including:
- Greater awareness of the impact that geopolitical frictions may have on economics, market advantages and rising costs.
- Protect against reputational and legal risks by incorporating ESG and climate frameworks.
- Limit reputational, operational and legal risks by preparing for data breaches and cyberattacks.
- Mitigate workforce risks in light of inflationary pressures on healthcare and basic needs.
- Invest in holistic resilience frameworks to anticipate future crises and improve capacity to deal with shocks.
(Writing by Cleofe Maceda; editing by Daniel Luiz)
