COVID-19 is turning many UAE expats with jobs into supersavers

Personal finance priorities have changed, and people now make a conscious effort to cut down on expenditures

Image used for illustrative purpose only.

Image used for illustrative purpose only.

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Where financial experts have failed to get people to save money and secure their future, a virus from Wuhan, China, has succeeded.  It may even have created a generation of expatriate supersavers who will reshape the economy.

Since March, some of the households in the UAE fortunate enough to retain jobs have been able to save money as non-essential spending plummeted across the board, from clothes, to movies, to dining out.

The reasons are obvious; several weeks of business closure and mobility restrictions imposed to contain the virus, coupled with job insecurity and fear of contagion, dampened any enthusiasm for going out.

“The unprecedented restrictions seen throughout the world and within the UAE on people’s movements have naturally meant that those people who have maintained their income during the lockdown have been able to save more each month, simply because there are fewer places to spend it,” said Paul Evans, Head of Middle East and Africa for Quilter International, an international wealth manager. 

And, as economic activity ceased, and the majority of the country’s population stayed indoors, overall consumer spending in the UAE declined in the last two months. “Luxury goods, beauty and personal care, apparel, footwear, eyewear and accessories are seeing the most significant decline,” said Rabia Yasmeen, senior research analyst at Euromonitor International.

Besides, given the current uncertainty, personal finance priorities have changed, and people now make a conscious effort to cut down on expenditures as much as possible. “Consumers are also likely to save and invest given the market circumstances rather than engage in compulsive purchase behavior,” Yasmeen told Zawya.

According to a National Bonds report in 2019, 68 percent of the residents polled in the country believed that it was difficult to save money.  While personal savings hardly grew, consumer expenditures expanded, from 550 billion UAE dirhams in 2018 to 552 billion dirhams in 2019. Spending was earlier forecast to jump further by nearly 2 percent this year, according to Euromonitor.

“[With the pandemic], the GDP (gross domestic product) of UAE is expected to decline by 3.5 percent as per the IMF (International Monetary Fund). Given the consumer expenditure is nearly 36 percent of the GDP, it is also expected to decline as consumers opt to save and invest rather than spend during the year,” said Yasmeen.

How much money people are saving

Ian Saldanha and his wife have been fortunate enough to keep both their incomes intact during the pandemic. 

The expatriate from India said that the recent lockdown has been the key driver for them to reduce their financial outgoings by at least 1,600 dirhams a month, although utility bills have increased as the members of the household have been staying at home.

“For health and safety reasons, my wife and I have reduced eating out at restaurants and ordering takeaway considerably - preferring instead to cook at home. We were also meant to travel abroad in both April and May but have had to cancel both those trips. As a result, we’ve spent less in these last two months than we would have otherwise,” the expat said.

“We would typically eat out twice a week, with an average cost of 150-200 dirhams per meal. So, on average, we see 1,600 dirhams per month on those expenses. Since we don’t need to travel to work anymore, there is a further reduction in monthly fuel costs and other travel-related expenses,” he added.

He, however, insisted that the increase in savings has been fueled mainly by their inability to go out rather than a conscious decision to trim down their expenses considerably.

“[Although, there’s] one area where we’ve made a conscious decision to cut down expenses [and it] has been in shopping for clothes. Our intention here has been to redirect the money we would have spent on personal shopping into helping out people in need [during the pandemic],” added Saldanha, who have relatives who have either lost their jobs or faced significant salary cuts.

“This has been more resultant of our inability to go out rather than a conscious decision to trim down expenses,” said Saldana.

Dave Simons, who works in the advertising field, said he's been able to save 25 percent or 1,400 dirhams of his monthly income during the last three months.

“I saved on fuel, parking and car maintenance costs [because I’ve been working from home]. I also decided to cut my personal expenses due to the uncertainty surrounding this crisis and the salary cuts imposed in our company,” he said.

Caution on hoarding cash

While saving money regularly is a good habit to have, Evans warned that hoarding too much cash is not a wise move. If the money is kept in a regular savings account, for instance, inflation will just erode the value of the money after some time.

“Inflation will erode your cash, meaning it will be worth less in the future,” Evans told Zawya.

For people who have longer term aspirations, Evans said their savings need to be supplemented with investments in other asset classes that offer better growth potential and can “ward off the perils of inflation.”

(Reporting by Cleofe Maceda; editing by Seban Scaria)

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