Crisis to affect consumer spending |
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Dubai - The global economic downturn has already impacted consumer spending in the UAE and will continue to do so in 2009, a market watcher has said.
A downturn is particularly evident in the luxury items sector, where large purchases of big-ticket items like cars, yachts and properties have dipped in recent months. A decline in tourist traffic is also threatening retail sales and is seen to hinder growth in the sector this year.
"Consumers at this point seem to be uncertain about the economic conditions and prefer to put a hold on large spending," said Himanshu Vashishtha, UAE managing director of The Nielsen Company.
"The biggest slowdown will be seen in the larger luxury items such as purchasing of property, cars and yachts. Consumers are in the mindset to hold on to that kind of decision for a bit."
Recovery
However, the UAE is more likely to recover faster than most economies, because the residents and businesses here are much better off and more optimistic than those in most parts of the world.
"At the same time, citizens of the GCC countries do not spend a great deal on food and drinks. Instead, cars, hotels, perfumes, handbags, accessories and travel features are relatively larger in the spending basket," he said.
"For the well-to-do in this region, luxury is seen as more of a necessity than an indulgence. So, in summary, there is a slowdown, but the chances of a faster recovery here are much better than anywhere else," Vashishtha added.
The economic crisis is posing challenges for many sectors and its impact on the global situation on consumers has been serious.
Nielsen's global online survey conducted in 52 countries in October 2008 showed that 62 per cent of the consumers globally consider their country to be in recession and only 18 per cent believe that they will be out of recession in one year.
Vashishtha said the situation in the UAE is not as serious, as the country still ranks third in consumer confidence.
He said the recent job cuts in Dubai's real estate sector is also going to impact consumer spending, which is "strongly linked to mindset besides economic prosperity".
"A job loss is a severe blow to both these aspects and is bound to impact how much a consumer can and more importantly is willing to spend. It is in times like these that we see paradigm shifts in consumer mindsets and behaviour," he added.
By Cleofe Maceda
© Gulf News 2009
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The major factor which effects the spending power for the residents of Dubai is the high rentals in the emirate. It is overpriced & caused a negative effect on the other sectors of the economy. All efforts should be directed to reduce the rates of rentals in oredr to help the consumer's spending power. [Report Abuse | Email to a Friend | Reply to this Comment]