Why don't we feel wealthier now that we're apparently saving all this money in rent and fees, and the average salary is going up, too?

First, the good news. Rents across the UAE are expected to continue softening in the new year, and unless you are a landlord with multiple properties to rent out, that can only mean more money in the bank. Then there's this government-mandated freeze on tuition fees in Dubai schools - no surprise fee hikes there. In addition, a general freeze on government fees will add to our pockets - or at least not force us to dip into them any deeper than what we did in 2018.

Of course, we are paying more for certain items thanks to the 5 per cent VAT implemented this year. But data suggests VAT had a marginal effect on the overall inflation, averaging 3.6 per cent in 2018, up from 2 per cent last year. That difference is well below the 4.5 per cent average salary hike residents received this year (Mercer data). A Mercer report also forecasts that UAE residents are in for another 4.8 per cent average salary increase in 2019. Now add to that the falling price of petrol - January will be the third straight month of decline in petrol prices, hitting a 16-month low. We're all set for becoming (or staying) rich in 2019.

There's only one small bother. Why doesn't it feel so? Why don't we feel wealthier now that we're apparently saving all this money in rent and fees, and the average salary is going up, too? It's the sentiment. Feeling rich or even comfortable with your finances doesn't depend solely on how much you earn, spend and save, but is also a factor of sentiment. Do you, the consumer, feel confident about spending? Do you feel confident about your personal economic situation next year? Do you feel positive about the employment situation and your total family income next year?

That's the bad news, right there. Business sentiment may be up or down, but what matters most in an economy is the consumer sentiment. And consumer sentiment isn't exactly gung-ho right now. The economy works best when people have the cash to spend and they spend it. If consumers don't grease the nuts, bolts, and gears of the economic machinery with their cash, it leads to friction in the moving parts of the engine, which causes it to slow down.

The barrage of bad news about global economic uncertainty and rising global unemployment levels may have made some of us switch to 'save' mode. That is natural - in the face of uncertainty, humans tend to hold on to things. Pre-historic hunter-gatherers would store food and amenities for the harsh winters. We tend to switch to that Paleolithic forager mode when we expect uncertainty ahead.

Let's try and break out of it, though. The government has announced a slew of confidence-boosting measures, but those steps will only take us so far if we keep hoarding the fruits of those initiatives. Weak consumer confidence can become self-fulfilling. That is, low consumer confidence can lead to low spending, triggering a chain reaction of low demand, low growth and therefore even lower consumer confidence levels. That's a vicious cycle best avoided.