Dubai, UAE: The unemployment rates are projected to decline in several countries, including the UAE and Saudi Arabia, in 2023, signaling more resilience for jobseekers, the annual forecast released by the Mastercard Economics Institute for the coming year revealed.
On the flip side, some markets will feel the impact of inflation and rising interest rates more keenly.
The report titled ‘Economic Outlook 2023’ draws on a multitude of public and proprietary data sets, as well as models that are intended to estimate economic activity across the Eastern Europe, Middle East and Africa (EEMEA) region.
The report explores four themes that will continue to shape the global economic environment — high interest rates and housing, trading down and shopping, prices and preferences, and shocks and omnichannel.
Key findings:
After years of a housing boom, higher interest rates are poised to squeeze cost-of-living budgets, shifting the way consumers spend broadly. In major developed countries, the outlook anticipates housing-related spending as a share of goods to fall an estimated 4.5 percent over the course of 2023, below pre-pandemic levels.
In the UAE, housing-related spend remained at the same levels (5.9 percent) in 2022 as in 2019.
This was also the case in most other EEMEA markets, such as Saudi Arabia with 10.9 percent.
Broad spending should maintain resilience in the face of inflation, with consumers choosing wallet-friendly brands and chasing the best value. Globally, grocery shoppers made 31 percent more trips to the store this year compared to 2019 – partially to reduce food waste – while their average spend per visit was roughly 9% lower.
As of September 2022, consumers in the UAE increased their grocery shopping trips by 28 percent compared to September 2019 but spent 21.4 percent less per visit.
Restaurant spending frequency in the country was nearly 30 percent higher in September 2022 than in September 2019, while the average ticket size was nearly 20 percent lower as even higher-income consumers reined in excess.
As food and energy costs eat up a greater share of the consumer budget, lower-income households will feel an especially strong pinch. From 2019 to 2022, discretionary spending by high-income households grew nearly twice as fast as for lower-income households. However, much of this gap will diminish with the normalization in inflation.
The Mastercard Economics Institute expects inflationary pressure to ease next year, with the average inflation rate of developed economies falling from 7.1 percent YOY in Q4 2022 to 3.1 percent YOY in Q4 2023.
Many markets in the Middle East and Africa show a larger gap between affluent and non-affluent households in 2019 vs 2022 discretionary spending, e.g., Morocco with 71 percent and Jordan with 60 percent.
Businesses with an omnichannel presence are likelier to withstand shocks by meeting customers where they want to shop. The analysis suggests that having a multichannel presence provided a six-percentage-point lift in retail sector sales through 2022. Small and large restaurants were saved from losing an additional 31 percent of sales during the height of lockdowns with their omnichannel presence. Similarly, small omnichannel clothing stores outperformed online-only and brick-and-mortar-only firms, growing 10 percent and 26 percent faster, respectively.