(MENAFN - Arab News) Car installments, credit cards and real estate financing plans are proving to be major channels for Saudi consumers to meet their purchasing needs.
How do huge budgets influence the lives of Saudi nationals and how do the citizens overcome the burden of inflation to enjoy a luxurious lifestyle? These two questions are being commonly asked by a majority of families in the Kingdom.
To find answers to these questions, Arab News spoke to a number of financial analysts who are of the view that the Kingdom's huge budget is aimed at facilitating the lifestyle of the common man first and then pave the way for a fair distribution of services.
Mohammed Shams, an economist, says that the inflation rate reduces the purchasing power of Saudi nationals, and this is happening currently.
"The Saudi purchasing power is declining, with increasing prices of foodstuff, services and houses rents. Awkwardly, the Saudi citizen lives a luxurious life that almost does not fit his financial budget. Bank loans, and credit cards are playing a vital role in facilitating purchases for each citizen," he said.
Shams says the Saudi citizen should ideally spend 8 percent of his or her salary to meet basic needs. But this is is not happening.
"The Saudi citizen spends percent of his salary to finance his extra needs. For example, Saudis spend a large part of their budget on food. When they need to spend an extra percent then it is from a bank loan," he said.
Shams did not deny that a large part of Saudis' salaries goes toward house rents and health.
"A large part of a citizen's salary goes to house rent and medical treatment.
But his extra expenses go for food, gatherings, and wedding parties, in addition to travel and tourism. Some Saudis buy their new cars on installments. Some of them immediately sell their cars to benefit from the market price. Some Saudis do that to be able to get married or travel abroad," he added.
Shams said the government was trying its best to improve the lifestyles of citizens and provide them with affordable services by launching several projects in its huge budget.
He, however, added: "The high budget will not have an immediate impact on the citizen s life. The impact will be known in the next few years."
Essam Khalifa, also an economist and a fellow of the Saudi Economics Society, said the Kingdom's oil revenues had also contributed to high inflation and in turn reduced the citizens' purchasing power.
"What common people are not understanding is that any increase in the budget will be followed by inflation. But it has a positive effect too. It will lead to better services in several sectors like health, education and housing," he said.
"There is no doubt that the rate of inflation is increasing continuously, leading to high rents of apartments and high prices of lands," he added.
"The government has started several initiatives and made big budgetary allocations for housing, health and education with a view to arresting the rising prices. The first to be affected by the high budget is the customer who is unable to offer the high market prices," he said.
"It is a normal phenomenon to see the inflation increasing by five percent annually in Saudi Arabia and worldwide. Reports confirm that the inflation rate, and food and beverage prices have increased by five percent in the past year alone," he said.
According to Khalifa, people still manage to enjoy what he terms as a luxurious life despite inflationary pressures.
Khalifa is of the view that maintaining a good standard of living and finding employment for the large number of the Kingdom's youth are among the major challenges.
Saifallah Sharbatly, deputy general manger of Mohammed Abdullah Sharbatly Co. Ltd., said Saudi families must rationalize their consumption strategy in order to overcome inflation.
"There is no doubt that inflation is increasing at an annual base rate of five percent, which reduces the purchasing power of each customer by five percent too. A citizen who gets a monthly salary of SR4000 to SR5,000 will never be able to meet his heeds unless he starts rationalizing consumption," he said."Statistics show that
70 percent of a Saudi national's salary is spent on food," he said.
"This is a very dangerous phenomenon. Saudis still buy extra stuff because they lack budget management skills," he added.
"I believe that Saudis whose salaries do not exceed SR5,000 will never be able to live a luxurious life due to inflation. The only solution for such people is to resort to bank loans, installment plans and credit cards. Such a strategy will, however, have far-reaching effects on their future lifestyle," he added.
