Majid Al Futtaim, the leading shopping mall, communities, retail and leisure pioneer across the Middle East, Africa and Asia, released its ‘State of the UAE Retail Economy’ Q4 report, which revealed that overall consumer spending was up 19% in 2022 compared to the previous year.
There was a notable 13% growth in spending across the retail economy for the full year including, leisure and entertainment (29%), fashion (25%), hypermarkets and supermarkets (11%) and general retail (9%).
This increase was driven by the rise in international visitors to the UAE, which more than doubled to 14 million in 2022, bolstered by major events including FIFA World Cup in neighbouring Qatar.
Ahmed Galal Ismail, Chief Executive Officer at Majid Al Futtaim – Holding, said: “The UAE’s unwavering ability to triumph in times of economic adversity has led to the highest annual GDP growth since 2006. Majid Al Futtaim’s latest State of the UAE Economy Report highlights the strength and resilience that underpins the country’s position as a beacon of social and economic prosperity for the MENA region.
“Driven by its leaders’ clear vision, progressive policies and a steadfast commitment to the long-term success of the Nation’s people, the United Arab Emirates is well-placed to continue to deliver sustained growth for the long-term.”
The UAE posted its strongest annual GDP growth since 2006, jumping to 7.9%, from 3.9% in 2021.
The drivers of this boost were broad-based, across oil and non-oil sectors. As expected, oil remained the main component due to a rise of around 38% in the average oil price, causing the sector to rebound to 11.4% growth, after contracting by 0.7% the previous year.
The non-oil economy demonstrated robust growth at 6.6%, buoyed by government efforts to attract investments and boost the country’s tourism sector.
Consumer Behaviour Trends
The final quarter of 2022 saw people becoming more cautious with their spend, opting for discounts and deals for essential items, and cutting back on non-essential’s such as electronics.
The average spend per transaction in hypermarkets and supermarkets was down 3% during the year, however overall spending in the segment was up 11% on the year prior, showing movement towards smaller basket value and more frequent transaction.
The extended 2.5-day weekend also influenced the increase in consumer spend, with weekend retail sales increasing by 11.3% versus the previous year. This translated to additional spending of approximately Dhs5.5 billion according to Majid Al Futtaim Point of Sales (POS) data.
Inflation was a reality in 2022 ending the year at 5.2%, however, it was still significantly less than elsewhere in the world. Consumer optimism remained high though, despite inflation.
In Majid Al Futtaim’s Happiness Lab survey, approximately 90% of respondents viewed the UAE’s current economic situation positively.
The Majid Al Futtaim POS data indicated that this optimism is evidenced by a peak in absolute consumer spending in the fourth quarter of 2022, which accounted for 29% of all retail economic activity during the year.
Burgeoning Digital Economy
Analysis suggests that the UAE has the world’s fastest-growing e-commerce market, with sales forecast to reach USD 9.2 billion by 2026.
Spending in this area peaked in Q4 2022 and grew by 20% for the full year compared to 2021, with three-quarters of consumers saying that digital payment methods are the preferred option, according to Majid Al Futtaim POS data.
Fintech solutions such as buy-now-pay-later (BNPL) gained pace, with 45% of consumers using BNPL financing in the past year, up from 21% a year earlier.
A majority of online spending by residents was in the hypermarket and supermarket sector, which witnessed spending growth of 40% during the year.