Ramadan's economic impact is not what matters, say Gulf experts

While fasting may slow some economic growth, many people feel happier, experts say

A cannon at Sheikh Zayed Grand Mosque in Abu Dhabi is fired to mark the end of the day's fasting. Victor Besa / The National
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The economic impact of Ramadan in the Middle East is still not fully understood, but regional experts say its effect on the well-being of participants would outweigh any negative conclusions drawn.

Despite several global in-depth studies into the financial disruption caused by Christmas, the month-long period marked annually by Muslims working shorter hours has yet to be seriously studied under the microscope of how it affects national productivity.

Experts have said the lack of good data regionally means Ramadan is “understudied”. However, certain trends have emerged over the years.

“Family expenditure, particularly on food and clothes, increases,” economist and Gulf specialist Dr Frederic Schneider told The National.

In my opinion, [Ramadan's] primary value lies in strengthening the social fabric of the nation
Dr Frederic Schneider, economist

"Certain food sales peak during Ramadan, such as dates, while other items are consumed less, like caffeinated drinks and tobacco."

Dr Schneider said electricity consumption tends to increase ... because of increased night-time activities and media consumption shifts too, "especially with Ramadan TV shows and associated media [and] ad campaigns".

"That being said, the effects of Ramadan are smaller compared to the overwhelming effect that Christmas has on retail in Christian-majority countries.”

Decades-old data

Globally, efforts have been made to understand the business of Ramadan. A report by Dinar Standard stated the UAE lost about $1.4 billion in GDP during the holy month due to the wind down.

While the study was from 2011, before the days of remote work, widespread online shopping and home delivery, it also showed up to one in four Muslim professionals stating they did not maintain the same level of productivity as compared with other months.

Three years later, a study by the US-based National Bureau of Economic Research found longer Ramadan fasting “had a negative effect" on output growth in Muslim countries but, crucially, “increases subjective well-being among Muslims”.

“We have established causal evidence for a negative effect of Ramadan fasting on economic growth in Muslim countries,” the report found.

“This is accompanied by an increase in the levels of self-reported happiness and life satisfaction among Muslims,” it said.

The NBER study cautioned that the results should not be interpreted as implying that religion, broadly understood, necessarily causes poor economic performance as trends vary across countries.

In tune with the wider mood surrounding the topic, it said that more studies were needed.

“Economic studies, in general, do find a significant decrease in aggregate economic activity,” Dr Omar Al Ubaydli, director of studies and research at think-tank Derasat in Bahrain, told The National.

“This is driven primarily by people working fewer hours and being less likely to enter the labour market.

“However, there is also a redistribution of gross domestic product from certain sectors to others as people's habits change. For example, people travel less but spend more on food at the grocery store. People are less likely to go to the cinema, but they are more likely to purchase new clothes.”

Adapting work deadlines around Ramadan

As Islam follows the lunar calendar, Ramadan takes place earlier every year and now coincides with the traditional tourist season in the Gulf.

“One thing that has changed is government regulations, which have been relaxed, for example, with regard to secluding daytime customers of restaurants,” said Dr Schneider.

Another long-term trend, he said, has been the gradual commercialisation of Ramadan, with increased retail sales.

When asked if there was there any sector that was negatively affected by the changed routines of Ramadan, Dr Schneider cautioned the effect was more on “consumption and work schedules than on volume”, with many Muslim countries having adapted to the month by finishing some projects by Ramadan and picking up after Eid Al Fitr in the same way as organisations in Christian-majority countries work around Christmas and New Year.

In higher latitudes, Ramadan closer to the winter solstice means shorter fasting hours than summer but the effect is “minor” in the Gulf, he said.

“The largest impact of extended fasting times tends to fall on manual/outdoor labour, but, in the Gulf, this is mostly performed by non-Muslim foreign workers,” he said.

But perhaps what is more important to consider is the impact of Ramadan beyond numbers and economic trends. Even the current studies find that fasting and adhering to Ramadan makes those partaking happier and less fixated on work.

“Ramadan is a complex event whose effects are far more wide-ranging than mere economic figures,” said Dr Schneider.

“In my opinion, its primary value lies in strengthening the social fabric of the nation.”

Dr Al Ubaydli said that “the negative effect on headline gross domestic product” must be compared with the positive spiritual effect.

“The same studies that detect decreasing economic activity also find significantly increasing happiness among Muslims,” he said. “So, it's not all about money.”

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Updated: March 26, 2024, 4:22 AM