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UAE jobless rate set to drop in 2023: Mastercard

Mastercard analysts pointed out that some markets would feel the impact of inflation and rising interest rates more keenly while unemployment rates are projected to decline in several countries, including the UAE and Saudi Arabia

Unemployment rate in the UAE is expected to drop in 2023, indicating more resilience for jobseekers, according to a forecast by Mastercard.

Findings by Mastercard Economics Institute’s Economic Outlook for 2023 said while housing-related spending in the UAE remained at the same level in 2022 as in 2019, consumers shopped, dined out more frequently but spent less per visit.

In its annual outlook for the coming year, Mastercard Economics Institute said as of September 2022, consumers in the UAE increased their grocery shopping trips by 28 per cent compared to September 2019 but spent 21.4 per cent less per visit.

“Restaurant spending frequency in the country was nearly 30 per cent higher in September 2022 than in September 2019, while the average ticket size was nearly 20 per cent lower as even higher-income consumers reined in excess,” said the report that 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.

In the report, which shows how a new multi-speed global economy will affect growth and consumer spending behavior, Mastercard analysts pointed out that some markets would feel the impact of inflation and rising interest rates more keenly while unemployment rates are projected to decline in several countries, including the UAE and Saudi Arabia, signalling more resilience for jobseekers.

“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,” said the report.

The Mastercard Economics Institute expects inflationary pressure to ease next year, with the average inflation rate of developed economies falling from 7.1 per cent year-on-year basis in fourth quarter of 2022 to 3.1 per cent in fourth quarter of 2023.

Many markets in the Middle East and Africa show a larger gap between affluent and non-affluent households in 2019 versus 2022 discretionary spending.

Businesses with an omnichannel presence are likely to withstand shocks by meeting customers where they want to shop, said the report. 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 per cent of sales during the height of lockdowns with their omni channel presence. Similarly, small omnichannel clothing stores outperformed online-only and brick-and-mortar-only firms, growing 10 per cent and 26 per cent faster, respectively.

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 per cent over the course of 2023, below pre-pandemic levels.

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 per cent more trips to the store this year compared to 2019 – partially to reduce food waste – while their average spend per visit was roughly 9.0 per cent lower.

In the UAE, housing-related spending remained at the same levels (5.9 per cent) in 2022 as in 2019.

This was also the case in most other EEMEA markets, such as Saudi Arabia with 10.9 per cent.

— issacjohn@khaleejtimes.com