GULF LESS ATTRACTIVE FOR EXPATRIATES

The rising cost of living is making Gulf countries less attractive for expatriate workers. This could potentially undermine governments’ efforts to develop their non-oil sectors and thereby diversify away from oil, says a report issued by Moody’s Investors Service, that is among the world’s most respected and widely utilised sources for credit ratings, research and risk analysis. Most governments of the Gulf Cooperation Council (GCC) have imposed price controls on basic commodities and/or rent caps. Many of them have also announced large salary hikes for public sector workers. The United Arab Emirates, for instance, raised federal government employees by 70 per cent in November 2007. Many other Gulf governments have since passed similar, albeit less dramatic, public sector wage increases. Besides, most governments in the region are widening their subsidy nets. Commenting on the situation, Moody’s report covering the whole of the Middle East says that although Gulf oil-exporters can currently afford to raise rates of government expenditure in order to cushion the social cost of inflation for its citizens, such actions are gradually making governments reliant on higher and higher oil prices in order to balance their budgets. This may constrain their ability to adjust to a potential future downturn in oil prices, warns Moody’s.