Today's Edition
A. SREENIVASA REDDY (ABU DHABI)
Household spending in the GCC region will outperform that of international peers, according to a new report by Oxford Economics, creating significant opportunities for companies operating in consumer-facing sectors.
“We project consumption will increase 3.4% per annum across the GCC in the next five years, compared to 1.7% in advanced economies,” said Azad Zangana, head of GCC Macroeconomic Analysis at Oxford Economics.
“We also expect inflation to remain low and steady, safeguarding the purchasing power of households while also limiting cost pressures for firms.”
The report highlights that real household consumption across the UAE, Kuwait and Qatar is expected to average more than 3.5% growth per year over the next six years, while Saudi Arabia is forecast just above 3%. By contrast, consumption in the US is expected to expand only 2%, and just 1.7% across advanced economies as a whole.
For the UAE, Oxford Economics expects consumer spending to be supported by a buoyant labour market. While unemployment is anticipated to peak this year, the rate is projected to decline steadily in the years ahead, reinforcing household confidence and underpinning robust demand.
Inflation trends also set the UAE apart from many advanced markets. During the pandemic years, inflationary pressures in the Emirates peaked at 4.8%, far below the 8% level reached in the US and the 7% average in advanced economies. Price gains are expected to remain moderate, easing from 2027 onwards, offering households a degree of stability in their purchasing power.
“Low and steady inflation helps stabilise consumption patterns and provides a degree of certitude for households to allow them to spend,” Zangana noted.
Credit growth is emerging as another powerful driver of consumption. The UAE in particular is experiencing a structural break-out in personal lending, aided by relaxed borrowing standards for both nationals and expatriates. The value of personal bank loans surged 17.8% in the three months to April 2025 compared with a year earlier.
Housing transactions are also booming. Real estate-related loans increased 3.5% in 2024, propelled by a sharp rise in activity in Dubai, where transactions for apartments and villas climbed 42.5% year-on-year and median property prices advanced 8.7%. Oxford Economics points out that buoyant property markets not only reflect confidence, but also drive demand for furniture, white goods, and other durable household goods.
With GCC currencies largely pegged to the US dollar, regional central banks are expected to mirror upcoming cuts in US interest rates. Oxford Economics anticipates the US Federal Reserve will lower rates by 125 basis points by the end of 2026. This monetary easing will be mirrored in the UAE and across most of the GCC, providing an additional lift to domestic demand.
Employment is expected to grow nearly ten times faster in the GCC than in advanced economies over the remainder of this decade. Oxford Economics underlines that such labour market strength is a critical factor for sustaining consumer spending momentum, particularly in the UAE where expatriate inflows are further boosting demand.
However, the report cautions that the region’s heavy reliance on hydrocarbons remains a key vulnerability. Using its Global Economic Model, Oxford Economics estimates that a 10% fall in oil prices would reduce real consumption levels by 0.74% by the fifth year, equivalent to shaving 0.15 percentage points off annual growth.
“Unless the drop in oil prices is deep and long-lasting, it is unlikely to change the overall picture for household spending,” Zangana concluded.
