Today's Edition
MAYS IBRAHIM AND KHALED AL KHAWALDEH (ABU DHABI)
Despite recent geopolitical tensions and economic challenges, the UAE economy has demonstrated resilience in 2023 with its GDP expanding by 3 percent, propelled by the strong performance of non-oil sectors, according to the annual 'State of the UAE Retail Economy' report for 2023, issued by Majid Al Futtaim, a leading shopping mall, communities, retail, and leisure pioneer in the Middle East, Africa, and Asia.
"2023 saw the UAE economy demonstrate resilience and growth despite ongoing regional and global challenges such as geopolitical instability, market volatility, and the looming threat of global recession. Bolstered by factors such as inward foreign investment, tourism, domestic confidence, strategic initiatives, and international economic agreements, the Nation's robust 2031 vision spanning social, economic investment, environment and development prosperity look to be firmly within reach," the report stated.
Inflation Set to Further Decline
It further noted that the UAE successfully reduced inflation from its peak of 5.2 percent in 2022. Throughout the year, inflation rates remained below global and regional benchmarks, averaging at 3.3 percent. This figure was notably lower than the global median of 6.9 percent and significantly below the Middle East average of 13.9 percent. According to the report, Oxford Economics predicts that this trend will persist into 2024, with inflation projected to decrease further to 2.8 percent by the end of this year. This anticipated decline is expected to encourage increased spending in the economy.
Rise in Consumer Spending
The report indicated that the UAE consumer spending rose by 13 percent in 2023 compared to 2022, on the back of low inflation and strong growth. Increases in overall spending were driven by a 12 percent increase in spending within the non-retail economy (government services, airline tickets, petrol, education, etc.) and a 14 percent increase in the retail spending economy (hypermarkets and supermarkets, retail general, leisure and entertainment and fashion). Fashion spending led the growth, rising 31 percent year-on-year (YoY), which was driven by 36 percent increase in spending in fashion and accessories, and 25 percent rise in watches and jewellery spending.
"The growth outlook for 2024 within the sector looks promising as the region continues to be seen as a 'haven of growth' for fashion. It is expected that the luxury market will continue to expand thanks to the rising tourist numbers and a thriving e-commerce marketplace," the report read. UAE: 'A Light House for the MENA Region' Ahmed Galal Ismail, Chief Executive Officer at Majid Al Futtaim Holding, said: "The UAE's far-ranging social and economic ambitions continue to fuel the Nation's success in creating long-term prosperity for its people. Over the past 12 months, its proven resilience to external pressures, coupled with progressive policy-making and an investor-friendly business environment has seen the UAE further strengthen its position as a lighthouse for the MENA region.
"Bucking global trends, the Nation's ability to act as a magnet for global talent, investors and entrepreneurs, has translated to a record number of visitors, far surpassing pre-COVID levels, fueling consumer confidence and further contributing to its thriving retail sector. Looking ahead, buoyed by positive retail economy indicators, the UAE is well-positioned to continue its remarkable growth trajectory."
E-commerce Trends
The report indicated that the UAE has embraced the e-commerce boom "ignited" by COVID-19 lockdowns, becoming a stronghold for online retail due to its top-tier logistics and digital infrastructure. Supported by an "ambitious" Digital Economy Strategy, the country aims to double the digital economy's contribution to GDP by 2032. E-commerce penetration in the UAE has more than doubled since 2019, reaching 12 percent in 2023, with mobile sales accounting for 70 percent.
Majid Al Futtaim data reveals a 15 percent increase in e-commerce spending, with hypermarkets/supermarkets and retail categories driving growth, according to the recent report. "This trend is supported by a strong fintech sector in the UAE and digitally savvy consumers. A study by Dubai Economy and Visa in 2023, revealed that 61 percent of respondents favour digital wallets for online payments. This momentum aligns with Dubai Economic Agenda D33, which aims to position Dubai among the top four global financial hubs by 2033".
Travel and Tourism Surge
The report showed that the UAE experienced a surge in tourist numbers across all seven emirates in 2023. Dubai International Airport reported its highest traffic since 2019, with a 39 percent surge in passenger traffic over the first nine months of the year, reaching an estimated 86.8 million by year end. This ultimately contributed to a rise in hotel occupancy rates to 77 percent, surpassing the pre-pandemic levels of 75 percent in 2019. It noted that Dubai hosted 17.2 million overnight international visitors in 2023, marking a19 percent increase from the previous year and surpassing pre-pandemic figures. With such momentum, Oxford Economics forecasts a further 15 percent increase in international overnight visitors to the UAE in 2024.
Real Estate Boom
The UAE's real estate market continued its record-breaking streak in 2023, with property sales transactions reaching an all-time high in volume and value. Apartment sales dominated the market, accounting for 72 percent of total transactions in the year, while villa purchases surged in popularity among investors, as stated in the report. "Overall, property transactions in 2023 grew by 18 percent compared to 2022, netting a phenomenal volume of 114,000+, making it again another record year while the value of these sales grew even faster at a rate of 39 percent, reaching Dh370 billion". The report revealed that Dubai saw a rapid increase in property prices, growing by approximately 19 percent annually, making it the "second-fastest growing real estate market" globally. Despite the surge, experts believe the market is not "overheating", with prices still below their peak in 2014.
