What is the economic impact of Ramadan?

The holy month typically involves shorter working hours and can make worshippers happier

Abu Dhabi, UAE.  May 17, 2018.  Sheikh Zayed Mosque at dusk.  The first morning of Ramadan.
Victor Besa / The National
Section:  National
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Ramadan is a time for spiritual reflection and regeneration, a strengthening of belief through feeding the mind rather than the body. But what is the impact on economic growth and development in Muslim-majority countries?

The issue is a complex one, even if it is sometimes dealt with simplistically.

If 700 million Muslims deny themselves sustenance during daylight hours for a month, and often shorten working days by several hours, surely this will hit productivity?

Yet others have argued that if properly observed, a Muslim worker after fasting, can be more focused on important tasks and emerges as a better person, and a better employee.

Several attempts have been made to measure the role Ramadan plays in economic growth. The most comprehensive is a 2014 report by the US-based National Bureau of Economic Research, using data from Muslims fasting in 167 countries over 60 years.

ABU DHABI. UNITED ARAB EMIRATES. 29 MAY 2019. The Ramadan market at ADNEC. (Photo: Antonie Robertson/The National) Journalist: Saeed Saeed. Section: National.

The study, by Filipe Capante and David Yanagizawa-Drott, concluded that researchers had “established causal evidence for a negative effect of Ramadan fasting on economic growth in Muslim countries”.

But it also reported that this was “accompanied by an increase in the levels of self-reported happiness and life satisfaction among Muslims”.

The NBEC study also found - after comparing summer Ramadans with those that fell in winter - that the length of the fast was significant in measuring the loss of productivity.

In the Southern Hemisphere, a Ramadan in July is a season of shorter days, while in the Northern Hemisphere they are much longer, allowing a direct comparison.

“Longer prescribed Ramadan fasting has a robust negative effect on output growth in Muslim countries,” the report said, claiming that lengthening the fast by a single hour could reduce output growth by 0.7 per cent.

This was only observed in Muslim majority countries, however, as was another finding; that Ramadan makes people happier. “Put simply, it makes them happier in spite of making them relatively poorer,” the authors concluded, pointing out that the two effects could cancel each other out.

The al-Rabat Sweets and Bakery, founded by Iraqi immigrants in the UAE, is pictured during the Muslim holy month of Ramadan, in Sharjah on May 28, 2019.  / AFP / KARIM SAHIB

Dr Rumy Hasan, a lecturer in science policy research at the University of Sussex in the UK, said he believed Ramadan did restrict economic growth.

Based on a typical reduction of the working day by two hours in Muslim countries, and factoring in the loss of productivity from fasting workers, he calculates the holy month “has a three per cent recessionary impact every year. There is no getting round it.”

He found the total loss of 42 working hours for each employee during Ramadan is not made up during the rest of the year. “The reduction in working hours are not compensated for afterwards," he said.

This view is contradicted by the National Bureau of Economic Research study, however. It also does not take account of the boost to the economy during Ramadan and Eid, with increased spending especially in the hospitality and leisure sectors.

A 2015 poll by YouGov in the Middle East and North Africa (MENA) found that almost exactly half of respondents said they were as productive during the holy month as the rest of the year, but that six out of 10 said their spending went up during Ramadan.

Almost a third also said they put off making major purchases until the Ramadan sales.

Another survey, by the Islamic marketing consultancy Ogilvy Noor, last year calculated that Ramadan was worth £200 million (Dh1bn) alone to the economy of the UK, a non-Muslim majority country.

Online shopping has proved another stimulus, with internet sales last year rising by 106 per cent in the second week of Ramadan, while travel plans made once Ramadan was over rose by 51 per cent leading up to Eid Al Fitr in the Middle East.

ABU DHABI. UNITED ARAB EMIRATES. 29 MAY 2019. The Ramadan market at ADNEC. (Photo: Antonie Robertson/The National) Journalist: Saeed Saeed. Section: National.

Productivity in Ramadan, is a joint survey from 2011 by DinarStandard, a growth research consultancy, and Productive Muslim, described as the world's first personal development platform for Muslims.

It reported 77 per cent of Muslims said they tried to maintain the same level of productivity as during the rest of the year. Only three per cent agreed with the proposition “nobody works during Ramadan”.

The report calculated the loss in monthly Gross Domestic Product (GDP) or the market value of services and goods during Ramadan, finding that it represented four per cent per hour of work reduction per day.

For Saudi Arabia, this was around $2.4 billion for the month, and for the UAE, $1.47bn.

But the report also found employers can make a big difference in the degree of flexibility and understanding they show to Muslim employees, especially in non-Muslim majority countries.

This is echoed by a 2017 report by Oxford Strategic Consulting, which disputed a link between the number of hours of a working day and productivity.

“Rather than worry about the negative effects on business,” it said of the GCC and MENA regions, “business leaders should instead focus on improving well-being, increasing engagement and embracing flexible work patterns during the Islamic holy month.”

Productive Muslim takes another approach. It was founded in Texas by Mohammed Faris, who formally worked in risk management, with the aim of helping Muslim professionals with their work-faith balance.

Muslims pray and gather around the holy Kaaba at the Great Mosque during the holy fasting month of Ramadan in Mecca, Saudi Arabia, May 26, 2019. REUTERS/Waleed Ali

For Ramadan, it offers “seven steps to stay sane and spiritual”, including maximising time with the Quran and forward planning key tasks that need to be accomplish during the working day.

This month, says Mr Faris, is a unique opportunity to become more productive in all areas of your life. “Ramadan is a training camp to help prepare you to live the best version of yourself spiritually, physically, socially,” he said.