UAE consumers to shop, dine out more, but spend less per visit in 2023: Mastercard Economics Institute

The Mastercard Economics Institute has released its annual forecast for the year, reflecting how a new multi-speed global economy will affect growth and consumer spending behaviour.

The report indicates that some markets will feel the impact of inflation and rising interest rates more keenly.

On the flip side, unemployment rates are projected to decline in several countries, including the UAE and Saudi Arabia, signalling more resilience for jobseekers.

The report draws on a multitude of public and proprietary data sets, as well as models that are intended to estimate economic activity across the Eastern Europe, Middle East and Africa (EEMEA) region.

It explores four themes that will continue to shape the global economic environment — high interest rates and housing, trading down and shopping, prices and preferences, and shocks and omnichannel.

Its key findings show that…

• After years of a housing boom, higher interest rates are poised to squeeze cost-of-living budgets, shifting the way consumers spend broadly. In major developed countries, the outlook anticipates housing-related spending as a share of goods to fall an estimated 4.5 per cent over the course of 2023, below pre-pandemic levels.
  In the UAE, housing-related spend remained at the same levels (5.9 per cent) in 2022 as in 2019. This was also the case in most other EEMEA markets, such as Saudi Arabia with 10.9 per cent.
• Broad spending should maintain resilience in the face of inflation, with consumers choosing wallet-friendly brands and chasing the best value. Globally, grocery shoppers made 31 per cent more trips to the store in 2022 compared to 2019 – partially to reduce food waste – while their average spend per visit was roughly 9 per cent lower.
• Since September 2022, consumers in the UAE have increased their grocery shopping trips by 28 per cent compared to September 2019 but spent 21.4 per cent less per visit.
• Restaurant spending frequency in the country was nearly 30 per cent higher in September 2022 than in September 2019, while the average ticket size was nearly 20 per cent lower as even higher-income consumers reined in excess.
• As food and energy costs eat up a greater share of the consumer budget, lower-income households will feel an especially strong pinch.
• From 2019 to 2022, discretionary spending by high-income households grew nearly twice as fast as for lower-income households. However, much of this gap will diminish with the normalisation in inflation.

Mastercard Economics Institute expects inflationary pressure to ease in 2023, with the average inflation rate of developed economies falling from 7.1 per cent year-on-year in Q4 2022 to 3.1 per cent year-on-year in Q4 2023.

Many markets in the Middle East and Africa show a larger gap between affluent and non-affluent households in 2019 versus 2022 discretionary spending, for example, Morocco with 71 per cent and Jordan with 60 per cent.

Businesses with an omnichannel presence are likelier to withstand shocks by meeting customers where they want to shop. The analysis suggests that having a multichannel presence provided a six-percentage-point lift in retail sector sales through 2022.

Small and large restaurants were saved from losing an additional 31 per cent of sales during the height of lockdowns with their omnichannel presence. Similarly, small omnichannel clothing stores outperformed online-only and brick-and-mortar-only firms, growing 10 per cent and 26 per cent faster, respectively.