Dollar peg is most influential

In the business world, one word keeps cropping up: inflation. By some measures, the UAE has witnessed double-digit inflation, although experts say it is expected to stabilise in the coming years.

In this regard, Gulf News readers last year predicted right when they said that the cost of living would impact their lives the most in 2007. The same concerns pretty much remain in place for the coming year.

Also, this year the UAE dirham has fallen against international currencies, and is arguably grossly undervalued, due to the falling value of the US dollar to which it is pegged. To some extent imported inflation has resulted, although 70 per cent of the country's trade is conducted in the US currency.

For most of the year the UAE's stock markets were relatively subdued, but they picked up markedly in the fourth quarter following positive corporate earnings figures as well as declining local and international interest rates.

One of the readers' main concerns for 2008 is the rising operating costs of doing business. This includes hiring employees, transport costs and commercial space. As a result, it might become too expensive for businesses to set up here.

Looking back at 2007, our online readers said that the dirham-dollar peg was the most influential economic factor in their lives, which has reduced the value of their income between 20 and 30 per cent.

An increase in their income could possibly compensate, provided it is forthcoming.

Economists are optimistic that 2008 will witness a continued drive in the UAE's attractive business climate, including investments in real estate and tourism. But the issue of potential revaluation is on many minds.

What do you expect of 2008, economically? Are you optimistic?

Gulf news Readers say...

Prices keep climbing
This is my second year in the UAE. As compared to last year, I find the prices are much higher. I usually keep track of all my expenses through credit card reports that I receive at the end of each month. Grocery shopping tends to get very expensive, unless one is sure of what is essentially required. Also, during the holidays it's very difficult to manage money, especially since shopping is one of the major expenses, both for family and self. I usually have a budget set for every month and try my best to stick to it.
Ashraf Khalaf
Sharjah

Buying a home is still a dream

When I compare the cost of living in Dubai to that of Al Ain, there is a drastic difference. It is much higher in Dubai. We are always surprised by how much we end up spending here. My wife handles the grocery shopping every week and she manages the budget. We also considered investing in a home here, but judging by the speed of economic development and price rise, decided otherwise. I am not very confident about buying a home yet. Let's see how the market will progress in 2008.
Abdul Aziz Chazi
Sharjah

Spiralling rents are a big issue

Next year, I think prices will continue skyrocketing. We will have to come up with ways to spend as little as possible. The rent for my flat in Karama is now Dh35,000 more than it was last year, and I am afraid it will increase again. It is tough to handle these price rises when you're trying to support your family as well. I try to save by limiting myself from buying things I don't really need, such as the latest mobile phone or camera. I also buy groceries on weekends to avoid splurging during the week.
Louiz Balazon
Dubai

Eating out can be expensive

My family has lived here for around 30 years so it is not as difficult for us to cope with the high cost of living, as compared to newcomers. However, earlier it would be relatively easier to save. Now, everywhere you go you have to spend. We earn just enough to get through the day. I think a simple way to cut back on spending is by taking homemade food to work or college, instead of eating out, as it can get pretty expensive. Looking for bargains and discounts in supermarkets can also help.
Tasneem Hussain
Sharjah

People say...

Realty market is growing

The prospects for the economy in 2008 are favourable as the property market is still growing and attracting a great deal of investors.

Supply is catching up steadily, and legislation is being enacted suitably to protect investors, developers and the economy at large. The economy overall is prospering, and we also see opportunities in markets outside our home base here in the UAE.

The credit goes to the leadership of Dubai for sustaining the current favourable business environment, providing first-class industrial facilities and business support services, reducing red tape, streamlining administrative procedures, updating commercial laws to meet international obligations, and ensuring effective protection for investors.

However, the weakening of the US dollar is affecting everyone, so the government needs to act soon to help developers maintain control over costs.
Raza Jafar
Managing Director of Enshaa Holdings

High operating cost hurting

2008 will be a good year for businesses, considering that there are still many excellent opportunities in the UAE and across the region. The UAE economy continues its double-digit growth, and I think it's still a good time for any company with good fundamentals to participate.

While high operating cost could affect businesses, the public must be careful not to jump to conclusions about the solutions and ways of dealing with it. Rather than looking at the issue in isolation, we should apply context, considering also currency fluctuations, financial markets, economic growth, etc. — and how these affect, and are affected by, the increasing costs of business.
Fahad Al Gurg
Chief Executive officer of Arzaq Holdings

Aviation is picking up

We're excited about 2008 because business aviation in the region is growing at a very healthy pace.

Still, traffic, keen competition, high operating and transport costs, labour shortage are among the factors that could impact businesses in 2008.

By default, business aviation is a costly enterprise. You have state-of-the-art aircraft, highly-trained personnel, maintenance costs and increasingly expensive fuel all are part of the mix. I think we have to learn prudence and avoid having any kind of relaxed mentality towards cost control.
Paras Dhamecha
Chief Executive officer of Empire aviation group

Property will grow further

The real estate sector will grow further by 15 to 20 per cent, as the growing population will require more residential and office spaces in 2008.

However, parking shortage, high property rentals, operating cost and labour shortage could limit business operations. The high rentals have a direct impact on attracting high-skilled experts from Europe to come to Dubai.
Dr Shahriar Daneshjoo
Chairman of Bavaria Gulf

— Compiled by Sanya Nayeem/Community Journalist