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Consumer Spending in UAE to Reach AED677bn

Middle East : 05 April 2013

Source: Gulf News 2013

Dubai: With the economy recovering and the cost of living moving upward, consumers in the UAE are expected to spend more out of their pockets this year and in the next few years, industry analysts told Gulf News.

According to Euromonitor International , consumers are forecast to spend Dh677 billion this year, up 4.1 per cent in real terms over 2012.

An Hodgson, income and expenditure manager at Euromonitor International , said the fastest growth will come from the communications sector, with spending expected to hit 7.2 per cent year-on-year in real terms this year, while spending on housing will grow by 4.2 per cent.

Consumer expenditures in the country will be buoyed mainly by inflation, not rising consumer incomes. “Mainly due to inflation, we expect that spends on basic commodities and living essentials will increase,” said Abhik Gupta, Nielsen’s executive director for consumer packaged goods, in MENAP (Middle East, North Africa and Pakistan). “I doubt this will be driven by rising consumer incomes as the information coming from several large recruiters indicates that the UAE and Dubai are not seeing any significant salary increases, with pay packages in general remaining fairly flat,” he added.

Daphne Kasriel, consumer’s editor at Euromonitor International , noted that the UAE consumer market has changed since the global recession. “In the wake of the 2008 financial crisis, housing values plunged, enabling many renters to upgrade to larger and better-appointed homes. However, the market has now turned, pushing up rents by up to a quarter in some exclusive suburbs over the past year,” she said.

Property analysts confirmed on Tuesday that rents in some areas in Dubai increased by 3 to 4 per cent in the first three months of the year, when compared to the last quarter of 2012.

Consumers in the UAE said they expect their spending to be higher this year, given that the cost of goods and services has gone up.

Aimi (name changed), an expatriate from Japan was surprised to learn that one of her favourite restaurants has just increased prices of coffee by Dh10 and sweets by Dh5 to Dh10. “It seems other outlets are trying to make their tariff higher. For sure, our landlord will increase the rent,” she said.

Parents like Mylah from the Philippines are also saddled by rising education costs. “My daughter is going to the fifth grade and her tuition has been increased by Dh1,000. That doesn’t include the miscellaneous fees and books,” she added.

The robust e-commerce sector in the UAE is likewise going to boost consumer expenditures. “Online shopping is propelling consumer spending. There is a culture in the UAE that relies on convenience and e-commerce perpetuates this,” said Martin Waldenstrom, CEO of cashU, an online payment gateway.

Between 2013 and 2020, expenditure will expand by 34.1 per cent in real terms, with the communications sector posting a 62.5 per cent. Spending on health goods and medical services will increase by 41 per cent, while hotels and catering will grow by 40.3 per cent.

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