UAE tops in daily per capita consumer spending in world

Abu Dhabi, June 30, 2008 (WAM) - The UAE tops in daily per capita consumer spending in the world, which is alarmingly as high as US$27, against US$3.5 in rest of the Arab world, says a study. This huge gap is set to expand even more, with the spending behaviour going unnoticed and in the absence of corrective measures according to a report in 'Khaleej Times.'

According to initial findings of a recently conducted survey by the
Department of Planning and Economy in Abu Dhabi on the income and spending
of families shows that consumption tendency was alarmingly high as families
spend up to 60 per cent of their income, which is not a healthy sign for any
economy.

With the high economic growth rate witnessed in recent years, the UAE has
emerged as alarmingly high consumer society, putting strains on the economy.
The UAE economy has remarkably remained strong during the last few years.
However this all-time strength has been tainted by a couple of downsides,
notably high inflation and high consumer spending.

The high consumer spending accounts almost half of the UAE's Gross Domestic
Product (GDP), rising by 122 per cent during the last five years from Dh144
billion in 2002 to Dh320 billion in 2007.

This means consumer spending has been on the rise at the average annual rate
of 18 per cent, a rate that is twice as high compared to the overall
economic growth rate of the country during the same period.

As consumer spending is one of the main indices of economy, natural and
balanced increase in this index impacts positively on production and the
overall economic performance, whereas excessive rise would have a negative
impact.

For instance, a considerable chunk of liquidity would be drained at the
expense of production and investment. Indeed, some economic activity in the
country is linked with the pervasive culture of consumer spending.
Semi-official statistics indicate that per capita consumption in the
UAE is sevenfold higher compared to the average spending in the rest of Arab
countries.

The expansion of consumer spending at the expense of savings and investments
has adverse effects on the local economy, particularly in view of the fact
that 85 per cent of consumer goods are imported from foreign countries. This
trend obviously affects the trade balance, and cash flow from the UAE to
international markets would continue unabated. This trend has already
plunged the UAE to the top of Arab consumer spending.

The heavy consumption is sustained by many factors including high inflation,
which reached 10.9 per cent last year. Growth in the population rate which
continues to be fuelled by massive development projects is another.

In Abu Dhabi, according to a survey consumption tendency was alarmingly high
as up to 60 per cent of the family income, was consumed.

The survey covered the period between the whole of last year and the first
quarter of this year. The trend was more serious in high income bracket of
Dh10, 000 and above. Negative consumption has another face within the UAE
society.

According to the ACNielsen Online Consumer Confidence Survey conducted in 42
markets, shows 30 per cent of consumers in the UAE go shopping 'at least
once a week'. This figure was only second to Hong Kong which stands at 36
per cent.

To further emphasise the UAE's residents' craze for shopping as an
entertainment, the combined UAE percentage of respondents who shop for
'something to do' either 'twice a week or more', 'once a week', 'once a
month', or 'less than once a month' was recorded among the top 10 worldwide,
at 84 per cent.

This alarming consumption rate could, in the future, constitute a big hurdle
in the face of any plans to transform the country from being a consuming to
producing nation. It should be noted that consumption and production go side
by side. Each aspect complements the other in almost every developed
economy. Indeed, the largest consumer countries in the world are themselves
the largest producers.