Majid Al Futtaim's State of the UAE Retail Economy report finds that UAE recorded its strongest GDP growth since 2006, actualizing it to 7.9%. An increase in consumer spending was noted in the retail (13%) and non-retail economy (29%). E-commerce sales are on a strong upward trajectory, more than doubling to USD 6 billion in 2022 from USD 2.6 billion in 2019.
Majid Al Futtaim, the leading shopping mall, communities, retail, and leisure pioneer across the Middle East, Africa, and Asia, today released its ‘State of the UAE Retail Economy’ Q4 report, which revealed that overall consumer spending was up 19% in 2022 compared to the previous year.
There was a notable 13% growth in spending across the retail economy for the full year including, leisure and entertainment (29%), fashion (25%), hypermarkets and supermarkets (11%), and general retail (9). This increase was driven by the rise in international visitors to the UAE, which more than doubled to 14 million in 2022, bolstered by major events including FIFA World Cup in neighboring Qatar.
The UAE posted its strongest annual GDP growth since 2006, jumping to 7.9%, from 3.9% in 2021. The drivers of this boost were broad-based, across the oil and non-oil sectors. As expected, oil remained the main component due to a rise of around 38% in the average oil price, causing the sector to rebound to 11.4% growth, after contracting by 0.7% the previous year. The non-oil economy demonstrated robust growth at 6.6%, buoyed by government efforts to attract investments and boost the country’s tourism sector.
Consumer Behaviour Trends
The final quarter of 2022 saw people becoming more cautious with their spending, opting for discounts and deals for essential items, and cutting back on non-essentials such as electronics. The average spend per transaction in hypermarkets and supermarkets was down 3% during the year, however overall spending in the segment was up 11% on the year prior, showing movement towards smaller basket value and more frequent transactions.
The extended 2.5-day weekend also influenced the increase in consumer spending, with weekend retail sales increasing by 11.3% versus the previous year. This translated to additional spending of approximately AED 5.5 billion according to Majid Al Futtaim Point of Sales (POS) data.
Inflation was a reality in 2022 ending the year at 5.2%, however, it was still significantly less than elsewhere in the world. Consumer optimism remained high though, despite inflation. In Majid Al Futtaim’s Happiness Lab survey, approximately 90% of respondents viewed the UAE’s current economic situation positively. The Majid Al Futtaim POS data indicated that this optimism is evidenced by a peak in absolute consumer spending in the fourth quarter of 2022, which accounted for 29% of all retail economic activity during the year.
Burgeoning Digital Economy
Analysis suggests that the UAE has the world’s fastest-growing e-commerce market, with sales forecast to reach USD 9.2 billion by 2026. Spending in this area peaked in Q4 2022 and grew by 20% for the full year compared to 2021, with three-quarters of consumers saying that digital payment methods are the preferred option, according to Majid Al Futtaim POS data. Fintech solutions such as buy-now-pay-later (BNPL) gained pace, with 45% of consumers using BNPL financing in the past year, up from 21% a year earlier. A majority of online spending by residents was in the hypermarket and supermarket sector, which witnessed spending growth of 40% during the year.
UAE Property Market
The real estate sector witnessed a record-breaking year, with property sales at a 12-year high in terms of volume and value. Transactions jumped 60% in comparison with 2021, with sales values climbing by 76% to AED 265 billion in 2022. The market hit its peak in Q4 at 27,000 transactions, up from 16,000 a year earlier.