Tuesday, July 01, 2008

High Inflation Is actually Good For the UAE!

If you are living here in the UAE, there are more pressing matters to think of, beside of course the mercury level is already reaching 50 degree. The simmering heat is normal during summer and most residents, if not already gone, are leaving for vacation, including myself.

I have been reading a lot of articles on the current inflation that hits us hard. The spiralling cost is real and most of the expatriates will have to change their lifestyles as well.

A report says:

Nothing about the economy is more emotive than the cost of living. Having a wealth of information - on stock markets, levels of supply and demand, and the balance of trade - is all well and good. But, when it comes down to it, what the majority of people care about most is how it will hit their pockets.
And people’s pockets have been well and truly hit. In 2007 inflation in the UAE stood – officially – at 11.1 per cent, its highest level in at least 20 years. Rents have risen so much that the government moved to introduce a cap on price rises; the cost of everyday items is creeping up as the quality of life creeps down.
Yet some believe that high inflation is a good thing for residents. One commentator says that rising prices represent “the oil that drives the economy”, and are merely a consequence of rapid development and a booming property sector. The argument is that - as more and more people come to live and work in the UAE - intense demand (especially on rental properties) will inevitably drive up prices as the country attempts to fast-track its economy. But residents will, eventually, reap the rewards of this.
Another more controversial view is that high inflation is good because it can actually deter people from coming to live and work in the UAE. Businessman and commentator Sultan Al Qassimi says that – while he is in favour of immigration – “the country just can’t take any more people coming in”.
Al Qassimi believes that a higher cost of living may bring a better quality of life because it means fewer people will be putting pressure on essential services and infrastructure, like the roads.
Do you agree? Are we paying more, but getting a better quality of life?
Or is the rising cost of living deterring workers who could be of benefit to the economy, while spelling poorer living conditions (and higher levels of personal debt) for those already living in the UAE?

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