While expatriates are worried about the future, most see hope on the horizon as they adjust their spending and prepare for harder times.
Staying afloat while abroad
As people across the globe continue to endure the slog of what appears to be a long recession in the making, plenty of expatriate professionals in the UAE are feeling the pinch, too. It's hard to gauge the human toll of the crisis exactly because few official figures are available, but so far at least a thousand people have been laid off in companies in the property sector alone, and expatriates in other industries - recruitment, construction, consulting and advertising among them - are said to be facing cutbacks as well.
Khaled - he declined to give his real name - saw the shift in fortunes firsthand. He moved to the UAE five months ago to work at a trading company in Dubai, and quickly started to notice the deepening effects of the global economic crisis on the spend-it-and-forget-it consumer culture of the Middle East's star city. An auto enthusiast, Khaled first noticed that new models stopped appearing at a Mercedes-Benz dealership on his way to work, a stark contrast to the rapid turnaround he'd seen mere weeks before. Then, he says, his friends started losing their jobs or having to take massive pay cuts.
"I have a group of American friends here and some English guys, and they all live in the same building in the Marina," he said. "Three people have a job out of 22. If you really want to know how bad it is, you need to go speak to people in these buildings." While that assessment may appear bleak, Khaled and many other expats in the UAE still see a silver-tinted lining on these dark clouds. The UAE has been in the throes of an unprecedented boom for the past few years, they say, and a return to a more sane rate of growth was inevitable - and in the end, healthy. As companies and expatriate residents of the UAE formulate plans to cope with the new realities forced upon them by the economic slowdown, the hope is that tighter times will engender a culture of higher efficiency and less waste. More meat and less fat, in other words.
This mix of optimism and pessimism showed up starkly in a recent survey conducted by the Pan Arab Research Center for Zurich International Life, an insurer with offices in Dubai. In the survey, 500 white-collar expatriates in the UAE were asked a series of questions about their stances towards their finances and perceptions about the economy and job security in the wake of the financial crisis. "We are all feeling a bit of pain, there is more uncertainty around, and people have seen job redundancies and are worried about their job security," said Carlos Sabugueiro, Zurich's CEO in the Middle East. "But despite people feeling insecure, people felt this was the best place to be going forward because they were more confident about its long-term prospects. Short term it's painful, however medium- to long-term this is a place that people are confident will recover better than most."
Indeed, roughly 3 in 4 expatriates said they sensed serious worry among their colleagues about job losses. Yet an almost equal fraction said they planned to "sit tight" in the Gulf during the financial crisis because of the region's long-term potential. "I have a job that is quite good," said Sharon Luis, one expatriate who plans to wait out the financial crisis in Abu Dhabi, where she works in human resources. "I don't see leaving the Gulf for the next 10 or 20 years."
All the talk at the outset of the global downturn focused on the notion that the Emirates were positioned to weather the storm better than the West, where the trouble originated. With today's tightly interconnected markets for credit and investments, though, that initial optimism gradually morphed into a casual acceptance that what happens in the West can and does affect the economies of the Middle East - and the scores of expatriates who have come here during the past few decades to help build these developing nations into economic behemoths. About 80 per cent of the population of the UAE is comprised of expatriate workers, though only a small percentage of those are the highly paid, skilled expats that were the subjects of the Zurich survey.
Naturally, most of those expatriate workers appear at least somewhat perturbed by the financial crisis and are making a variety of adjustments to cope with it. Many of them are tightening belts and saving more money in the expectation that things could get worse. As the Zurich survey found, 69 per cent of expatriates are either somewhat worried or extremely worried about not being able to save enough, and an even greater percentage expressed worry about the rising cost of living. In addition to concentrating on saving, expatriates have reported cancelling holidays, delaying plans to buy cars and thinking twice about investing in property. They have even cutting back on relatively cheap rituals like the morning trip to the local coffee shop in an effort to save money wherever possible.
"I'm spending less nowadays because I don't know what's going to happen in one week or two weeks or a few months," Daryll Rosales said, a document controller in Abu Dhabi. "Right now the economy is not stable, so I have to save for the future or anything that will happen. I have to be ready." That falls mostly in line with what the Zurich survey uncovered: while only 38 per cent of expats said they were reining in spending because of the current economic climate, 59 per cent said the financial maelstrom was having a detrimental impact on their lifestyles. Mr Rosales said he has dialled back spending on restaurants and nights out and postponed plans to take scuba diving lessons. He has even started taking Abu Dhabi's free buses to work to save himself the Dh8 or Dh9 cost of a taxi.
"I've been cost-cutting, and my allowance for food and for extra-curricular activities has changed a lot," he said. "Before I always took the taxi, but now there's a free bus, and I take the bus." Other expatriates remain convinced that Government actions to reinvigorate the economy and the nation's substantial oil reserves stand to buoy the country in times of crisis - especially Abu Dhabi, which holds the vast majority of the country's oil reserves.
"Right now I don't see any expatriates it's affected," Jagan Nathan said, a finance manager in Abu Dhabi. "The main reason is Government funding and it's an oil-rich sector in this part of the world. The way things are going in Abu Dhabi, I expect the boom to continue for another 2 to 3 years, by the time the world recession will subside." But while he said the crisis was hardly driving expatriates to the brink - at least in Abu Dhabi - thanks to the emirate's strong position, Mr Nathan added that he was personally thinking about reducing spending on luxury items and focusing on essentials simply as a measure of prudence as retirement drew nearer.
"There are two criteria in this," he said. "Number one is that when the world economy is in recession, any prudent person will curtail spending, especially for luxury items they will be [buying] for the family. The second is the age factor. After a certain age, you feel like the value of money is more important and curtail your spending on unnecessary things." Other expatriates have been affected by the crisis principally because they are paid in currencies that have depreciated in value against the US dollar, to which the dirham is pegged. The British pound has lost over 30 per cent of its value against the dirham since last year: a pound used to cost Dh7.5; now a pound can be had for Dh5.2. That's a boon for expatriates from the UK who earn their salaries in dirhams, but for employees of multinationals who make money in pounds, salaries don't go as far as they used to in the UAE.
"It has affected me because I get paid in Australian dollars, and the Australian dollar has dropped 30 per cent [against the dirham]," said Andrew Oldfield, who works for an Australian tourist company based in Dubai. "So obviously it has affected the way I approach my spending and my saving... I'm not buying as many coffees. So simple things like that. And also travel, when I look at my summer holiday and what I will be doing. I will definitely be travelling to Australia for my holiday."
Tales abound in Dubai and Abu Dhabi about how expatriates are feeling the effects of a global economic outlook that appears far bleaker than it did just a few months ago. Some have abandoned their cars at airports and returned home; others have defaulted on loans, taken pay cuts or even been shown the door at work. Yet it's clear that a good portion are steadfastly convinced that things will get better.
In the Zurich survey, 57 per cent said they felt either reasonably confident or extremely confident that global financial markets would improve in the coming year. Another 53 per cent said they were confident about their own finances. "I think the next year will be a crucial point," Jo Howarth, a secretary from the UK, said. "It may get a little bit worse, then it's definitely going to start getting better."
Is she optimistic in the long term? "Very," she said. "You have to be." email@example.com