Economic Updates

Economic Advisory: February 2023

Economic Advisory: July 2022

Debt Management and Debt Restructuring

Ensure Your Firm Abides by the New UAE Economic Substance Rules by June-end to Avoid Penalties

Economic Advisory: June 2020

Aga Khan Economic Planning Board Economic Update: March 2020


Economic Advisory: February 2023

12 February 2023

The Aga Khan Economic Planning Board for the United Arab Emirates (AKEPB) is pleased to present an economic update to the Community. The information shared is based on credible and legitimate sources in the public domain.

The GCC’s GDP is expected to grow by 3.9% in 2023, stronger than the global GDP growth forecast of 2.9%. This will be driven by high oil production and the recycling of oil revenues into investment initiatives. Volatile oil prices, increasing geopolitical tensions, supply chain disruptions, inflation and the US Fed rate hikes resulting in a strong US Dollar, remain key risks. Given that most GCC countries are pegged to the US Dollar, GCC central banks follow the Fed in increasing interest rates.

If not resolved via diplomacy and dialogue in time, the current Russia/ Ukraine war which already has resulted in tremendous human and economic hardship globally, carries a potential of converting into a wider conflict with unforeseen geopolitical and economic consequences. Post pandemic inflation on the other hand remains elevated, reflecting supply and demand imbalances, higher food and energy prices, and broader price pressures.

To control inflation over the long run, the US Federal Open Market Committee (FOMC) has increased the target interest range to between 4.50 - 4.75%. As a result, our region is now entering a period of sustained inflation and rising interest rates. Most estimates point to an additional 0.75% hike in rates over the next few months. This is likely to result in a slowdown of non-oil growth, due to elevated costs of borrowing and reducing global demand. Travel and tourism continue to gain momentum, potential reopening of China and the removal of COVID related restrictions helping to boost numbers. However, it is worth noting, that around 50% of tourists to the GCC are from emerging markets, whose currencies have depreciated strongly against the USD, making the GCC a more expensive tourism destination.

In line with the recent Talika shared with the Community, with interest rates rising to curb the global inflation and Governments putting in place austerity measures, this will continue to put pressure on family resources. We therefore highly recommend Community Members to exercise prudence irrespective of your economic status as everyone will be affected.

AKEPB would now like to reiterate some previously communicated guidance:

Increased Cost of Living will Drain Savings Faster than Expected

  • The costs of necessities such as housing, food and petrol has risen faster than salaries and business earnings and may continue to do so for the foreseeable future
  • If you are sending funds to your home country for your family, ensure you save a small amount for an emergency fund locally. Ideally you should have enough savings to cover 6 - 12 months of basic living expenses in case you lose your job or fall ill or face a downturn in your business
  • UAE based members are advised to take advantage of the recently announced mandatory ‘Involuntary Loss of Employment (ILOE)’ insurance scheme. This will assist you to safeguard your emergency funds in the event of job loss for a temporary period of 3 months. Non-registration to this insurance scheme will result in imposition of penalties and fines

Interest Rates are Increasing and will Continue to Rise, Significantly Increasing the Cost of Borrowing

  • Exercise extreme caution when spending and carefully consider all risks before agreeing to make any investments or borrowing - avoid discretionary spending
  • If you do have financial debt, start by paying off debts that charge the highest interest first, usually this is your credit card. Once you have cleared that, move onto the next most expensive and then the next, while remembering to make minimum monthly payments on any other types of credit you have. By paying down your debt, your monthly obligations will also fall, allowing you to set aside a larger portion of your income towards savings

Manage Businesses Cautiously and Sensibly

  • Adhere to local compliance rules and regulations, especially when conducting financial and asset related transactions and do not circumvent any requirements as per the law
  • Monitor and maintain full records of all business and personal transactions and keep all supporting documentation in place and readily available. Maintain the discipline of having annual financial statements audited. Begin preparations for paying corporate tax, which is set to be implemented in the UAE from 1 June 2023. AKEPB will be organising seminars and workshops on this subject soon
  • Carefully assess any potential opportunities that come your way. If an investment opportunity appears too good to be true, it probably is. Seek proper advice before committing to it. Avoid investments which are volatile or promise high returns in a short time frame, keep a long-term horizon
  • Educate yourself, your family and your employees, where applicable, on technological and bank fraud and be vigilant to any unusual activity on your bank accounts
  • Keep your credit score high. Paying bills on time, keeping your oldest credit cards open and keeping your ratio of debt to available credit low will help keep your credit score high
  • Evaluate your costs structure for opportunities to reduce your fixed costs and improve your cash flow
  • Ensure that your business’ financial commitments are independent of your personal finances
  • Community Members who wish to engage with each other on any commercial transactions such as joint purchase of property or an asset, business partnership, employment, commercial contracts or financial transactions, are advised to prepare a written agreement with all the agreed terms particularly the exit clause and sign in front of a witness. We also suggest members to ensure that the
  • agreements are drafted considering all local laws and regulations. Members can seek help from the Legal Portfolio for any templates and support prior to signing

Focus on Self-Development to Strengthen your Profile

  • Continue to improve your job skills and technical knowledge
  • Seek newer avenues to pivot into upcoming career paths such as Climate & Environment related, food security and other related fields
  • The fast adoption of artificial intelligence (AI) at workplaces means areas will likely have high demand and one must explore upskilling in this sooner rather than later
  • Brush up on your English language skills. Residing in the GCC region, it is also very critical to learn the Arabic language
  • Ensure that you are present on online networking platforms such as LinkedIn
  • Read newspapers regularly to be aware of the continuously changing local, regional and global economic and political landscape
  • Keep your CV always updated so that you are prepared for any unforeseen situations

General Advise

  • Acquire health insurance if you are not covered. We cannot stress enough the importance of having adequate coverage for yourselves and your dependents
  • Look at opportunities of secondary income within your household. We highly encourage spouses to upskill themselves to enter the workforce as a second income earner
  • Ensure that all important documents such as your passports, residency visas, wills, powers of attorney, insurance and medical papers are always up to date, valid and accessible
  • Periodically update your personal information with your home embassy. Several countries have an online platform to register and update your personal data

The Aga Khan Economic Planning Board continues to monitor the changing economic outlook for the region closely and will continue to keep you informed of any further developments. We would like to remind you that the following resources are available for members of the Community:

  • IBNG Connect (www.ibngconnect.com) - An online business directory where you can connect, engage, and grow with global Community businesses
  • SME Business Hub – support & guidance for SMEs around cash flow management, business planning, compliance and VAT
  • Employment Opportunities Committee (EOC) - assistance with CV writing skills, job opportunities or career guidance
  • Alliances – where professionals can network, exchange learnings and best practices, upgrade their skills and gain exposure to other global alliances

For guidance or assistance on any of the subject matters mentioned above, please email us at: [email protected]

Economic Advisory: July 2022

05 August 2022

Please click here to read the full article.

Debt Management and Debt Restructuring

04 August 2020

Please click here to read the full article.

Ensure Your Firm Abides by the New UAE Economic Substance Rules by June-end to Avoid Penalties

28 June 2020

Please click here to read the full article.

Economic Advisory: June 2020

26 June 2020

Please click here to read the full article.

Aga Khan Economic Planning Board Economic Update: March 2020

23 March 2020

As you are aware, the coronavirus outbreak has now affected almost every country around the world. From an economic standpoint, the impact of coronavirus has resulted in a period of significant uncertainty and volatility. It is highly likely that economic growth will slow down in the coming months. Given the prevailing environment, the Aga Khan Economic Planning Board (AKEPB) for UAE would like to apprise the Jamat of the following:

Households

  • Avoid all unnecessary expenses at this time and monitor what you spend against what you earn; plan your expenses in a way that you increase your savings every month.
  • Avoid making new commitments until the economic outlook is clearer.
  • Speak to your landlord and seek rent waivers (1 to 3 months); where renewals are due, negotiate on contracts.
  • Ensure important documents such as wills, powers of attorney, insurance and medical papers are up to date and accessible.
  • Having health insurance could be critical in the weeks ahead. We advise you to ensure you have adequate coverage for yourselves and your dependents.
  • Maintain savings as a financial cushion against unexpected job or business loss. Now is a good time for families to create budgets if they do not have one, or review existing budgets to plan for the coming months.
  • The UAE government announced on 21 March 2020 some economic measures through the local commercial banks for customers. For details, please refer to the following link: Dubai banks announce business relief package for customers as part of support for UAE economy
  • Read newspapers regularly to be aware of the continuously changing local, regional and global environment.
  • School breaks could be extended further if the pandemic worsens. Working parents should explore options that would allow you to continue working from home.
  • Be cautious before making any short-term and speculative investments.

Businesses

  • As the pandemic spreads globally, consumer sentiment may weaken further. Those involved in sectors such as travel, hospitality, retail and F&B should prepare for reduced demand for their services for the foreseeable future.
  • Business owners should focus on cashflow as a priority and be financially prudent.
  • Speak to your landlord and seeks some rent waivers (1 to 3 months).
  • Call all suppliers and see if they will accept more flexible payment terms.
  • Speak to your bank to discuss your circumstances and see if they will be more accommodating on loans given the current economic situation and regional stimuli in place. On 21 March 2020, the UAE government announced some economic measures through the local commercial banks for businesses. For details please refer to the following link: Dubai banks announce business relief package for customers as part of support for UAE economy
  • Lower interest rates could constitute favourable news for those carrying debt on lines of credit, mortgages and floating rate loans. It will help ease the interest burden. Please speak to your bank to ensure that you are taking advantage of this.
  • Products from abroad may experience supply shortages and higher prices. If you are involved in trade, please consider disruptions in supplies and if possible, explore diversifying suppliers.

AKEPB is monitoring the situation closely and will continue to keep the Jamat informed of any further developments.