The Gulf States have long enjoyed a buoyant economy thanks to their rich oil fields. The petrochemical industries in Dubai, Oman, Kuwait and their neighbours have driven massive prosperity for the region, allowing the ruling families and governments to reinvest their oil dollars into a diverse portfolio of property, shopping, tourism and more.
But the petrochemical industry hasn’t just benefited Gulf natives. It has also become a haven for expats, who benefit from high salaries and an income tax-free environment. Many expats in Dubai, for example, earn a considerable premium over what they might earn back home and so thousands of families have been able to carve out an enviable quality of life here.
As reported elsewhere this month, expats in countries like Dubai seem to be spending ever longer here, creating a rather more permanent group of highly skilled workers helping to drive the Middle Eastern economy. Dubai alone now boasts an estimated 150,000 Brits, not to mention even more Americans, making it the largest enclave of Western expats anywhere on the planet.
Now though this could all be set to change. The price of crude oil has been in freefall for the last few months, having lost almost half of its value. Despite the hopes of a change in fortunes after Christmas the graph continues to trend down, and with it so do the economies of oil-rich nations.
In countries where oil is a major driver of the economy – Russia and many of the Gulf States being perfect examples – this precipitous drop in the value of oil is having a marketed effect on the respective economies. Effects that could be both long-range and far-reaching, potentially transforming the expat communities in the Middle East.
While only a percentage of the expats living and working in Dubai and other Gulf States are actually employed within the petrochemical industry, experts are already warning that the tightening economy could have a trickle-down effect on many verticals.
With falling profits these large companies and their highly-paid executives are likely to be less flush with their cash. Less spending from the top means a shrinking economy that can affect all manner of businesses. It seems likely that many expensive construction projects may be pared back or halted altogether. Retail is also likely to suffer with fewer people being willing to spend excess money in a falling market.
This means that the ”free ride” many expats in Dubai have enjoyed could be coming to an end. Economists are warning that not only could salaries shrink, but so too could the number of employees required by beleaguered companies affected by the economic downturn.
While it would be wrong to paint the Middle East as ”done”, it does seem that the expatriate dream here could be rapidly fading, particularly when other countries like China and Vietnam are continuing to perform strongly and attract expat workers in their masses.