Consumer spending on track in UAE

Growing fast and expected to exceed $260bn by 2021

An uptick in population, continued economic growth and high incomes are some of the ingredients needed to fuel growth in a country’s consumer spending.

The UAE scores well on all three of these metrics. The country’s population has surged over 50 per cent to 9.2 million last year from just 6 million in 2007, according to World Bank statistics. GDP growth is set to forge ahead despite global economic woes and expand at a projected rate of 3.2 per cent in 2019, compared with a growth of 2 per cent this year, the bank predicts. And the country’s 2016 gross national income per capita is the 12th highest in the world, standing at US$72,850 on a purchasing power parity basis.

It is no surprise then that the UAE’s consumer spending is forecast to surge to $261.7 billion by 2021, growing at compound annual growth rate (CAGR) of 7.5 per cent from $182.7bn in 2016, according to a report by the Dubai Chamber, quoting figures from Euromonitor International.

E-commerce, hitherto a tiny sliver of the country’s retail mix, is forecast to surge in the coming years

Consumer spending accounts for 45 per cent of the UAE’s GDP, according to the chamber’s report, coming in ahead of the Arabian Gulf average of 39 per cent, and in line with the 45 per cent figure for developing economies in Asia.

While housing costs account for the largest chunk of consumer spending in the UAE at 41 per cent of total spend, other sectors are projected to gain pace in the next five years.

The chamber forecasts that communications will be the fastest-growing sector in the UAE by 2021 with a CAGR of 10.2 per cent, thanks to the high mobile penetration rate in the country and other digital services. Mobile phone ownership in the UAE rose to 228.3 phones per 100 people in March of this year, one of the world’s highest penetration rates.

And the adoption of mobile technology is set to change the face of consumer spending in the UAE. E-commerce, hitherto a tiny sliver of the country’s retail mix, is forecast to surge in the coming years, thanks to the recent acquisition of Souq.com by Amazon, and the much-anticipated launch of Mohamed Alabbar-backed e-commerce start-up Noon. This is upping the pressure on the country’s bricks and mortar retailers who are turning fast to e-commerce.

Added together, such developments suggest that the UAE’s consumer spending can only keep on rising in the near future.