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

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

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

On the other hand, unemployment is expected to fall in several countries, including the UAE and Saudi Arabia, suggesting that job seekers are more adaptable.

The report draws on a wide range of public and proprietary datasets, as well as models designed to estimate economic activity in 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, markdown deals and shopping, prices and preferences, and shocks and omnichannel.

Its key findings show that…

• After years of a housing boom, higher interest rates are set to squeeze cost-of-living budgets, broadly changing how consumers spend. In major developed countries, the Outlook expects housing-related spending as a share of goods to decline by an estimated 4.5% over the course of 2023, below pre-pandemic levels.
  In the UAE, spending related to housing in 2022 will be the same as in 2019 (5.9%). The same is true for most other EEMEA markets, such as Saudi Arabia at 10.9%.
• Broad spending should remain resilient in the face of inflation, with consumers choosing wallet-friendly brands and looking for the best value. Globally, grocery shoppers will make 31% more store visits in 2022 compared to 2019 (in part to reduce food waste), while their average spend per visit falls by about 9%.
• Since September 2022, UAE consumers have made 28% more grocery purchases but spent 21.4% less per purchase compared to September 2019.
• In September 2022, the country’s restaurant spending frequency was nearly 30% higher than in September 2019, while average ticket prices were down nearly 20% as higher-income consumers also curbed overspending.
• Low-income households will feel the pinch especially hard as food and energy costs take up a larger and larger portion of consumer budgets.
• From 2019 to 2022, discretionary spending by high-income households will grow nearly twice as fast as low-income households. However, most of this gap will narrow as inflation normalizes.

Mastercard Economics expects inflationary pressures to ease in 2023, with average inflation in advanced economies falling from 7.1% yoy in Q4 2022 to 3.1% yoy in Q4 2023.

Many markets in the Middle East and Africa show a larger gap in discretionary spending between wealthy and non-rich households in 2019 compared to 2022, for example 71% in Morocco and 60% in Jordan.

Businesses with an omnichannel presence are more likely to weather the shock by meeting customers where they want to shop. Analysis shows that multi-channel presence increases retail sales by 6 percent by 2022.

With an omnichannel presence, small and large restaurants were spared an additional 31% loss in sales during the height of the lockdown. Likewise, small omnichannel apparel stores outperformed online-only and brick-and-mortar-only companies, growing 10 percent and 26 percent, respectively.