Economic Recovery in Slow Motion


Don’t count on the average consumer to bail out the local economy, not just yet!

Consumers will continue to get caught up in post-recession measures that are cutting into their spending, just as they are starting to feel some level of comfort about job security and financial health. Though inflation is still very much under control, but costs on a variety of everyday goods are rising. An increase in cell-phone bills, 3-4 Dirhams increase in a fast-food meal, and a 30% hike in petrol price all tally up quickly for consumers who are living on tight budgets, paying off debt or trying to build a savings cushion.

The money you spend filling up your car and the money you spend filling up your refrigerator is the money you can’t spend on other things. This is one of the bigger headwinds that the economy is fighting against.

Consumers are worried

Consumer confidence, essential in powering spending, also is waning again. Consumers are not throwing caution to the wind since there are tremendous headwinds, such as the lack of jobs, falling property market, tight credit conditions, and increasing transportation costs. Consider what the consumer is facing!

Food prices

Food prices are on the rise and will pinch everyone, no matter where they eat. Thanks to rising commodities costs, prices at the grocery store and at restaurants are moving higher. The cost of food eaten at home rose between 5% to 10% last year on the average, but food away from home increased even more. Major food producers are dropping discounts and upping food prices by 5% to 10% at the supermarkets and stores. Many restaurant operators  are expected to raise menu prices further this year.

The price increases for the average consumer are just as basic taxes, as most of these foods are essentials that people need to live on.

Transportation costs

Energy prices are going up again. Oil prices have tipped over $90 a barrel in recent weeks and are holding, pushing up prices of transportation. The cost of petrol in UAE increased last year between 30% to 40%. The taxi and school buses cost follow suit, as well as buss cards.

Fees and Fines

Fees are becoming more and more, covering all types of services that you use or sometimes don’t use. Fines are rising and collection of fines became a significant source of income. Traffic fines are totaling amounts in the range of billions.


Airfares are also taking off. It is no secret that the airlines are un-bundling their services from basic fares as a means of bulking up revenues. Increase in crude oil also adds up to the higher airfare cost.

Bank accounts

Banking fees are a moving target. Banks wrestling with reduced revenues from overdraft fees and other legislative-induced changes to their business models are looking to checking accounts, among other services and products, as cash generators. Banking fees are becoming higher. Smaller financial institutions, such as insurance and financial service companies  are following suit.

TV & Telephone bills

Even phone bills and TV-viewing costs are rising. Following in the steps of many cable TV companies, the local service providers are becoming more and more inventive in introducing various small fees that add up to the monthly bill.

Other costs & and jobs

Expect increases elsewhere, too. Take the price of raw cotton. As that escalates, manufacturers will push those costs onto consumers in the form of higher prices for any number of items made with cotton: blouses, denim, coffee filters and books.

Finally, but importantly, jobs are still scarce. This is the key to any recovery, of course. Though many households have done well in holding down spending and paying off debt, the employment picture is still grim for many. Unemployment rate remains high and confidence low.


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