Senior executives in the UAE and Saudi Arabia are confident that consumer demand across the Arabian Gulf will remain strong going into the new year, according to new research commissioned by The National.
The strength of local consumer sentiment comes as the UAE and Saudi Arabia are expected to experience higher GDP growth in 2017, even as the impact of last week’s landmark oil production cut deal takes time to have an impact on the countries’ finances.
A survey of more than 500 high-level executives, conducted by research company Borderless Access on behalf of The National, found that over 90 per cent of UAE-based executives agreed that consumer demand across the region "is likely to be strong for the remainder of this year, and into 2017", with 38 per cent of respondents strongly agreeing with the statement.
Saudi executives were also broadly in agreement that consumer demand would remain strong, with 31 per cent of responders strongly agreeing.
“Consumer confidence scores in the two richest markets in the region are driven by the growing middle class, which is increasingly consuming a wider range of goods and services,” said Dushyant Gupta, senior vice president at Borderless Access.
However, nearly one in five Saudi respondents disagreed with the statement, following a series of subsidy cuts and price increases in the kingdom over the past year that have negatively affected disposable incomes.
Economic growth has slowed across the Arabian Gulf region in the past 24 months, especially in Saudi Arabia, thanks to a sharp fall in oil revenues, hitting disposable incomes hard.
Saudi Arabia’s economy is forecast to grow by just 1 per cent in 2016, compared with 3.5 per cent in 2015, according to research firm Capital Economics.
The Central Bank of the UAE forecast that growth will rise to 2.2 per cent in 2016, compared with 3.8 per cent last year.
In spite of such economic challenges, the Gulf region continues to benefit from favourable consumption dynamics, thanks to a growing middle class and a rising number of high net worth individuals, according to Borderless Access.
“Since middle-class consumers everywhere are known for their aspirational purchases, a strong middle class suggests flourishing demand for a wider range of goods and services,” the company commented, noting that about two-thirds of Saudi families were classified as middle class.
“For instance, the participation rate of women in the Saudi workforce and their rising enrolment in education contribute to the rising demand for product purchases,” Borderless Access noted.
Consumer demand is likely to be positively affected by last week’s landmark agreement by Opec countries to cut oil production for the first time in eight years.
However, Capital Economics last week left its forecasts for Saudi economic growth unchanged, with the economy due to grow by 1.3 per cent in 2017, rising to 1.5 per cent by 2018.
jeverington@thenational.ae
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