UAE firms fear cost of living crisis threatens business continuity

Businesses in the UAE are concerned about a cost of living crisis, persistently high inflation and severe commodity price shocks, says a new report.

These issues have been identified by a group of executives as the top three short-term critical threats to business continuity and economic growth in the UAE, according to new research by the World Economic Forum (WEF) and Marsh McLennon, released on Monday.

The report is based on interviews with more than 12,000 executives and the views of more than 1,200 global risk experts, policymakers and industry leaders from 121 economies.

Emirati respondents to the survey also listed geopolitical resource scrambles, geoeconomic confrontation and failure of cybersecurity measures as the top risks most likely to pose the greatest threat to the country over the next two years.

The World Economic Forum report says UAE businesses face “very real risks” stemming from a prolonged cost-of-living crisis that includes spiraling supply chain costs, soaring wages and collapsing consumer spending power.

Businesses are also concerned about the impact of persistently high inflation and falling public sector investment, as well as shortages of public goods and human capital.

“For most of the UAE executives interviewed, the ‘new normal’ following the COVID-19 pandemic brought lingering fears of a converging inflation, debt and supply chain risks leading to economic collapse,” Risk Brad Simpson of management said. Head of Marsh Middle East and North Africa.

“[The report] It is also clear that the pandemic has profoundly impacted short-term risk concerns related to asset bubbles and resource-related geopolitical instability. These factors—along with cybersecurity concerns and failures in climate action—paint a picture of unease and uncertainty across the national economy. ”

To address these concerns, the report urges UAE businesses to undertake a number of mitigation measures, including:

• Raise awareness of the impact that geopolitical frictions can have on economies, market dominance, and rising costs.
• Protect against reputational and legal risks by incorporating ESG and climate frameworks.
• Limit reputational, operational and legal risk by preparing for data breaches and cyberattacks.
• Mitigate labor risk given inflationary pressures on healthcare and basic needs.
• Invest in holistic resilience frameworks to anticipate future crises and improve resilience to shocks.

(Writing by Cleofe Maceda; Editing by Daniel Luiz)

Cleofe.maceda@lseg.com