Rents and Food Lead Consumer Spending in UAE: Report

Published August 14th, 2017 - 01:11 GMT
Consumer spending is a major component in the UAE's GDP with a 45 percent share, compared to 39 percent on average for the GCC region. (File photo)
Consumer spending is a major component in the UAE's GDP with a 45 percent share, compared to 39 percent on average for the GCC region. (File photo)

With all the news headlines about companies hiring less and shutting down businesses, it may seem like consumers in the UAE are hesitant to open their wallets.

The latest consumption data collated by researchers would show otherwise. According to a new study, spending by consumers across the UAE has been on the rise and is expected to hit close to $200 billion this year and more than $260 billion by 2021.

consumer spending

Total expenditures by residents in UAE surged to $182.7 billion in 2016, up by nearly 15 per cent from a year earlier, led by huge expenses on rents and food.

Consumer spending is a major component in the UAE’s gross domestic product, with a 45 per cent share, compared to 39 per cent average for the Gulf Cooperation Council (GCC) region, 45 per cent for developing Asia, 56 per cent of the European Union and 68 percent for the US.

In a report released on Sunday, the Dubai Chamber of Commerce and Industry (DCCI), noted that housing expenditures reached $75.7 billion in 2016, accounting for nearly half (41 per cent) of total consumer expenditure during the year.

Food and non-alcoholic beverages represented the second-biggest chunk of household expenses, hitting a total of $24.8 billion during the year, while transportation expenses reached $16.7 billion, the third-biggest expenditure category.

Spending on communication, which can include charges for use of internet, mobile phones and other electronic devices, also eat up a huge portion of consumer spending.

Communication is the fastest-growing category that is expected to post a compound annual growth rate (CAGR) of 10.2 per cent through 2021, thanks to the high penetration of smartphones and other digital devices in the country.

“The growing popularity of mobile applications, and Dubai’s adoption of smart city solutions, are also expected to boost spending in this area,” the Dubai Chamber report stated.

Purchases of health goods and payment for medical services have been strong and are also expected to ramp up fast, posting an annual growth of 8.2 per cent over the same period.

UAE consumers spend a great deal of money on hotels and catering as well, with spending in this category forecast to register an annual growth of 8.1 per cent.

Expenses on education and leisure are likewise on the increase and these segments will likely grow by 8 per cent and 7.7 per cent, respectively.

The continued growth in consumer spending can be attributed to the fact that the UAE is constantly attracting residents with “relatively high incomes.”

The introduction of new mega developments that further diversify the country’s mix of retail and entertainment offerings, and the booming tourism market have also been identified as major catalysts for consumer spending growth.

“The UAE’s consumer market is largely being driven by a fast-growing population with relatively high incomes, which are key economic fundamentals that support a robust long-term outlook for spending growth in the country,” said Hamad Buamin, president and CEO of Dubai Chamber, which based its analysis on figures supplied by Euromonitor International.

High incomes, changing lifestyles and increased health consciousness are also expected to lead to higher spending on goods and services.

By Cleofe Maceda

 

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