Dubai: The UAE ranks first in the retail business environment league for the Middle East and Africa (MEA) region this year with its strong wealth and high consumer spending, the Dubai Chamber of Commerce and Industry said in a report.
Based on research by Business Monitor International, the country led with 57.5 points out of a possible 100, to Bahrain's 43.5 that ranked last in the region.
Kuwait ranks a relatively close second with 55.7 points but is unlikely to challenge the UAE for the top spot over the long run given the smaller size of its retail market, according to the analysis.
According to a recent MasterCard survey, 17 per cent of consumers in the UAE are currently spending 71 per cent to 80 per cent of their annual income on household expenses.
Across the Middle East and Levant, 58 per cent of consumers plan to maintain the same level of discretionary and recreation spending in the first half of this year as in the last six months of 2009. In the UAE, 59 per cent of consumers plan to do the same.
Overall optimism
Consumer confidence in the UAE jumped from 29.6 points in the second half of 2009 to 86.1 points for the first half of this year.
The increase was the largest compared to neighbouring countries, and the optimism in the UAE is the third highest globally, after Vietnam and Qatar.
"2009 was a challenging year for UAE retailers with a weakening in aggregate demand, a tightening in accessing credit and increasing household saving rates hampering revenues," the chamber said.
According to the UAE Central Bank, in the first five months of 2009, the value of personal loans declined by 8.3 per cent, highlighting the shrinking pool of credit available to consumers for purchases of durable goods, such as automobiles and electronics. It is estimated that improving market sentiment in the months ahead will lead to rising private consumption.
This will help retail sales to grow by 4 per cent this year and 8.2 per cent in 2011, the chamber said. The retail sub-sectors, which are forecast to show strong growth, include pharmaceuticals, automotives and consumer electronics, according to leading UAE retailers.
The key factors behind the strong growth forecast in the UAE's retail sales in 2010 and beyond are the expected increases in household consumption, growing urbanisation, high wealth levels as well as an improvement in consumer confidence as the worst of the economic crisis is over.
"Overall, the outlook for the UAE retail sector remains positive. The UAE has clearly confirmed its position as a new force in global retailing, which is clearly reflective of the nation's appetite for international brands," the report said.
As the UAE recovers from the effects of the global economic downturn, higher real disposable incomes should help increase spending.
