Visitors enjoy shopping at Mall of the Emirates in Dubai. Picture for illustrative purpose only. Image Credit: Clint Egbert/Gulf News

Dubai: UAE consumers will likely increase their spending by 5 per cent next year despite inflationary concerns, according to the Mastercard Economics Institute’s Economic Outlook for 2024.

The annual report, released Thursday, said it anticipates UAE consumers and businesses would have to make essential choices about spending and investing due to price differences and interest rates affecting budgets.

The Mastercard Economics Institute expects year-on-year consumer price inflation for 2024 to be 1.9 per cent in the UAE. Globally, the Institute expects inflation to be moderate to 4.9 per cent year over year in 2024, down from 6 per cent in 2023 but above the pre-pandemic trend of 2.7 per cent.

GCC large-scale projects

Mastercard predicts that GCC countries will maintain growth next year with ongoing expansionary fiscal policies. The report states that Saudi Arabia is actively investing in large-scale projects, and the UAE aims to sustain its role as the regional trade and investment hub. Tourism is expected to be a positive factor for many economies in the region as well, it said.

“While economies in the MENA region are impacted by several factors, including geopolitical conflict, cost of living instability and currency fluctuations, strong government visions provide a supportive foundation for economic stability,” said David Mann, Chief Economist, Asia Pacific and EEMEA, Mastercard.

“This is encouraging empowered and resilient consumers to take charge of their needs confidently and wants within the constraints of available resources,” said Mann. “Moreover, a strong labour market underpins consumer purchasing power, and the Mastercard Economics Institute anticipates the easing of monetary policy will help sustain consumer spending in interest-sensitive sectors.”

Moreover, the report also found that while the global economy will feel more ‘normal’ in the coming year than the previous three, it will still be an economy seeking equilibrium, carefully balancing high-interest rates, salaries and prices compared to pre-pandemic levels.

Spending is prioritised on ‘needs’ and ‘wants’

Even with inflation taking a larger chunk of spending on essentials, consumers will prioritize the discretionary spending that matters most, with travel, events, live concerts, and movies remaining popular choices, evident in the consumer attention captured by Taylor Swift’s The Eras Tour and “Barbenheimer”, said the report.

Meanwhile, the GCC’s strong push to grow its tourism sector has made the region one of the world’s fastest-growing destinations. In 2023, the GCC is estimated to have registered a 22 per cent increase in inbound tourist spending compared to 2019, 26 percentage points higher than the global average.