Dubai: The Dh1.6 billion bonus windfall for UAE government employees, announced on Saturday to coincide with the 100th birthday of the UAE’s founding father, the late Shaikh Zayed Bin Sultan Al Nahyan, will encourage people to spend on luxury items, experts say.
All federal government employees and retirees, civilians and military, as well as beneficiaries of social welfare services, will get a bonus amounting to one month’s basic salary, President His Highness Shaikh Khalifa Bin Zayed Al Nahyan ordered on Saturday. The money will be paid before Eid Al Fitr, in mid-June.
Each individual will receive between Dh5,000 and Dh50,000.
Analysts and retailers say that this injection of cash will result in an uptick for the economy, as government employees go out and spend their bonuses during Ramadan and Eid, traditionally popular periods for the shops anyway.
“People like to spend bonuses on non-discretionary goods. It gets indulged,” said Nikola Kosutic, head of research at Euromonitor International in the Middle East.
Kosutic said on Sunday that he expected people to go out and spend their bonuses, resulting in quite a significant impact on a couple of segments, namely luxury goods and luxury outbound travel.
“It will have a big impact on luxury, outbound tourism, and bigger ticket items,” he said
An ‘easy come, easy go’ mindset dictates the spending plans of someone who has recently received a bonus, Kosutic said.
“On average you save much less of a bonus than you would if it was your monthly salary,” he said.
One of the segments expected to do particularly well out of the bonus bonanza is consumer electronics, with the fast-approaching World Cup enticing people to purchase televisions in advance.
“Heading towards the World Cup, people will buy TVs. They’ll want those 80 inch OLED models,” Kosutic said, stating that electronics retailers were likely to see a growth in sales.
One senior retail executive pointed to the timing, ahead of Ramadan and Eid, as being of particular significance.
“It is the right time to the get the bonus as Ramadan is approaching,” said Deepak Babani, executive vice-chairman of the Eros Group, a Dubai-based electronics retailer that is partnered with Samsung, Hitachi, and TCL, among others.
The Dh1.6 billion paid out as bonuses is “going to come into the market,” Babani said, adding that “even though a part of the bonus will go to clothes and other things, people will spend on consumer electronics, especially home appliances.”
The senior executive noted that many Emiratis, the majority of whom work for the government, tend to traditionally upgrade their electrical appliances and furnishings during Ramadan.
According to Atul Joshi, head of distribution at Jumbo Electronics, “any kind of expansion in the capability of the people to spend will definitely benefit not only the retail sector but also the whole economy.”
“Consumer electronics will also benefit,” he added.
In a recently-released report by social network Facebook, the tech giant identified a rise in e-commerce activity in the region during Ramadan — with an average increase of 35.8 per cent, peaking at a 78 per cent increase at night.
“The unexpected money will definitely help the spending power of the people, and especially before Ramadan. It will spur growth in the retail industry due to the [additional] cash,” said Stanley Joseph, general manager of Al Rais Group.