Dubai: It's been about seven years since the global financial crisis, but UAE consumers are still worried about the economy’s staying power.
In its latest consumer confidence index, market research firm Nielsen said that 53 per cent of residents polled in the fourth quarter of 2015 believed that they were in recession.
The number of people expressing recessionary sentiment, representing 4.9 million of the UAE’s nearly 10 million population, registered a ten-percentage-point increase from the previous quarter.
Optimism about employment opportunities is also on a decline, with only 58 per cent of consumers saying they feel positive about job prospects, a seven-percentage-point drop from the third quarter of 2015.
The residents’ pessimism has been attributed to the continued decline in oil prices, coupled with the slowdown in China and subdued economic outlook and widening fiscal deficits in the region.
“[Respondents] anticipate high probability of recession because they perceive the government will have limited fiscal capacity to spend due to dwindling oil prices,” Arslan Ashraf, managing director for Arabian Peninsula at Nielsen, told Gulf News.
“Bearish job outlook is linked with the overall performance of the economy which is now forecast to grow at a slower pace than last year,” he added.
Ashraf, however, said that the recent government announcement to stimulate the “non-oil dependent” economy can provide some kind of “solace” to consumers’ concerns.
According to International Monetary Fund (IMF) estimates, economies in the Middle East will grow this year to 3.9 per cent, a cut of 0.6 per cent from earlier projections.
When compared to other markets in the region, however, consumers in the UAE remain the most upbeat, with the confidence index standing at 108 as of the fourth quarter, a rise of one point from the third quarter of 2015.
The other countries in the Middle East, including Egypt and Saudi Arabia, registered a decline in consumer confidence.
Across the region, the number of respondents who believed they were in recession increased from 60 per cent to 70 per cent.
Aside from consumers, business owners in the UAE are also getting worried about economic prospects. A separate report released last week indicated that small businesses, in particular, are putting off plans to hire additional staff, unveil new products or set up new outlets.
However, David Hunt, CEO of Gulf Finance who commissioned the study, said that the “fundamentals of the UAE market remain strong” despite the “current prevailing negative sentiment.”
Some analysts said that consumers' growing anxiety is mostly psychological. "People are over-reacting and over-thinking. Despite the oil reduction, economy is expected to grow mildly," Alp Eke, senior economist at the National Bank of Abu Dhabi, told Gulf News.
Eke pointed out that the UAE economy is still forecast to grow by 2.5 per cent in 2016, considering the oil price will be at around $45 per barrel.