x Abu Dhabi, UAESunday 23 July 2017

Debt-fuelled lifestyle can be a risk to us all

Living large in the UAE is a personal decision. But when that is done in a way that can affect the economy, it becomes a problem for everyone.

Everyone living in the UAE knows someone who has bought into the archetypal lifestyle by driving the latest luxury car, jetting off around the world and dining at expensive restaurants.

That in itself is fine – people are free to spend their earnings as they see fit – but the concern is that many of these people have done so by going deep into debt.

That will become a problem for everyone if there are so many people living far beyond their means that it poses a threat to the equilibrium of the UAE economy. One difficulty of addressing this is that nobody knows the true extent of consumer debt, even though all indications are that it is high enough to be the cause of genuine concern.

That is why initiatives like the Statistics Centre Abu Dhabi’s survey of spending habits by 9,000 households – mostly Emirati but with a significant number of expatriates, and representing both urban and rural communities – is important.

Over the next year, hundreds of field staff will collect confidential data about income, expenditure and consumption, after which the information will be collated and analysed to help guide future policy decisions.

In itself, this will provide useful figures about how households in the emirate operate but its true importance comes from the context because this survey is just part of a coordinated effort at both emirate and federal level to understand and manage individual debt.

Another of the initiatives is Al Etihad Credit Bureau, currently in development, which will share information between financial institutions so that those deeply in debt cannot simply go to another bank and get a new credit card to continue their spending.

Figures on lending show the situation is getting worse, with banks extending Dh48.3 billion in new loans in the past six months – more than the total lent in the 18 months before that.

Anecdotal impressions about unsustainable lifestyles by many in the UAE are strongly supported by research, such as the findings of a YouGov survey released late last month that more than half of the UAE’s residents expect to be in debt long into the future. It echoes findings by HSBC that half of people in the UAE spend all they earn – and more.

Living large in the Emirates is a personal decision. But when that is done in a way that can affect the UAE economy, it becomes a problem for everyone.