Consumer spending appetite remains strong in UAE and Saudi

Despite concerns about cost-of-living increases and global economic uncertainty, consumer spending power in the UAE and Saudi Arabia is expected to remain strong this year, according to research by Kearney.

For the latest edition of its regular survey into consumer sentiment and purchasing habits, global management consulting firm Kearney asked inhabitants of the UAE and Saudi Arabia to indicate how macro-economic developments are impacting their purchasing appetite.

The research found that consumers in the two countries are keeping a close eye on global developments, with 8 out of 10 consumers in Saudi and 9 out of 10 in the UAE concerned about global market volatility and rising inflation.

In Saudi, 72% of consumers noted an increase in the prices of goods purchased over the last three months, with that percentage 11% higher among UAE-based respondents. Price increases were felt most in food and beverage, transport including gas prices, restaurants and hotels, clothing and footwear, and electronics.

Further reading: Cost-of-living crisis is top global risk for 2023 (WEF report).

However, despite these concerns and noticeable price hikes, consumers in both countries are optimistic about their spending behaviour in the next six months, with around half (46% in Saudi; 56% in the UAE) planning to make a major household purchase (a purchase for more than SAR 1,000 or AED 1,000).

Debashish Mukherjee, a partner at Kearney, said that the robust economic foundation of the two countries plays a large role in this consumer behaviour. “A strong economic foundation and continued favourable policy changes towards business and individuals have given consumers the confidence in their purchasing power, regardless of the macroeconomic environment,” he said.

Illustrating the case, in 2022, against a backdrop of a raging war in Europe, geopolitical upheaval and more, spending on non-essential items grew by double digits in both the UAE and Saudi Arabia. Further from home, spending on such items dropped, or even nosedived as consumers braced themselves for worse times.

“Overall, there is a positive, local sentiment when it comes to the retail sector, despite global macroeconomic headwinds. We anticipate that this trend will continue into the new year,” Mukherjee concluded.