Strong Gulf consumer spending defies global concerns

Reuters/Ahmed Jadallah

• Survey finds shoppers do not plan spending cut 
• Report forecasts 5.7% GCC retail growth up to 2026 
• Qatar records high growth on back of World Cup
• Concerns that global problems could impact on domestic economy

Consumer confidence among the Gulf’s shoppers remains strong, despite concerns about the impact of a global slowdown and rising prices.

A survey by management consulting firm Kearney found that 88 percent of respondents in the UAE and 79 percent of those questioned in Saudi Arabia were concerned about global market volatility and rising inflation.

At the same time 83 percent in the UAE and 72 percent in Saudi Arabia said prices of goods had increased in the last three months.

Despite these concerns the report found that shoppers in both countries said they did not intend to reduce their spending over the next six months, and around half are planning to make a major household purchase of more than $250.

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“UAE residents have reported a [16 percent] increase in spending on non-essential items compared to 2021. And we anticipate that this trend will continue into the new year,” said Debashish Mukherjee, a partner at Kearney Middle East.

This sentiment was endorsed by Kapil Sethi, deputy CEO at Dubai-headquartered conglomerate GMG, which manages more than 120 retail brands across the Middle East, North Africa and Asia.

“We are seeing an increase in consumer spending across the region,” Sethi said. “While online shopping continues to surge in the post-pandemic era, we are also seeing the rise of a hybrid retail environment, referred to as ‘phygital’, that has emerged and is set to define the regional retail landscape for years to come.”

Ashish Panjabi, chief operating officer at consumer electronics firm Jacky’s Retail, described current consumer spending levels as “robust”. 

“The UAE has shown its resilience and has shown how it has weathered most storms better than most of the world. That trend should continue in the coming year as well,” Panjabi said.

The Kearney report aligns with another one published in November by Alpen Capital, a UAE-based investment banking advisory firm, which found that the GCC retail sector surpassed pre-pandemic levels in 2022, registering 15.7 percent year-on-year growth and generating revenue of $296.8 billion.

Alpen forecast that the sector will grow by an average of 5.7 percent up to 2026. 

“Operators have shifted their focus on brand acquisition to strengthen their geographical presence as well as expand and diversify their product offerings,” Krishna Dhanak, managing director at Alpen Capital, said.

“Larger e-commerce players are likely to acquire niche operators offering customised products and services. We expect consolidation in the industry to intensify in order to drive earnings, gain market share and improve operational efficiency.”

Consumer concern over the global outlook was reflected in the latest S&P Global Dubai Purchasing Managers’ Index (PMI), which reported that while domestic orders were still strong towards the end of 2022, new export business in December was down.

“While domestic demand conditions are holding up relatively strong, weakness in the global economy led to a first decrease in new export business since August 2021,” said David Owen, an economist at S&P Global Market Intelligence.

“Businesses were less confident that output growth would be sustained in 2023, as year-ahead expectations fell to the weakest level since February 2021 amid concerns that economic problems abroad will seep through into the domestic economy. 

“On the positive side, firms enjoyed a renewed fall in their expenses as commodity prices moderated and input availability improved, which supported an additional cut to selling prices.”

The Alpen report said the speed of growth across the Gulf states would vary over the next four years.

It predicted that Saudi Arabia and UAE, which will account for 78.5 percent of total Gulf retail sales by 2026, are forecast to grow at an average annual rate of 6.5 percent and 5.1 percent, respectively, until 2026. 

Qatar was forecast to record the highest growth in the region during 2022, on the back of the World Cup, with retail sales estimated to rise by 36 percent, and then by an average of 3.5 percent in the run up to 2026.

Bahrain, Oman and Kuwait are expected to grow at an average rate of 7.3 percent, 6.1 percent and 3.5 percent over the same period.