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Dubai Chamber analysis highlights retail growth

 On top of the remarkable resilience of Dubai’s trade flows to the economic slowdown, the retail sector has displayed strong growth performance, stated a recently-released analysis by Dubai Chamber of Commerce & Industry based on a study by Business Monitor International, the UAE ranks first in the retail business environment league table for the Middle East and Africa (MEA) region in 2010 with its strong wealth and high consumer spending leading it to outperform its regional peers. Scores range from the UAE’s 57.5 out of a possible 100, to Bahrain’s 43.5 at the bottom in the league table. Kuwait ranks a relatively close second (with 55.7 points) but is unlikely to challenge the UAE for the top spot over the long-run given its smaller size of its retail market (see table 1).

2009 has been a challenging year for UAE retailers with a weakening in aggregate demand, a tightening in accessing credit and increasing household saving rates hampering revenues. According to the UAE Central Bank, in the first five months of 2009, the value of personal loans declined by 8.3% highlighting the shrinking pool of credit available to consumers for purchases of durable goods, such as automobiles and electronics.

That said, despite the economic slowdown, shopping malls continued to expand in the UAE last year. In the first half of 2009, three main shopping malls opened in Dubai, namely, Dubai Mall, the Arabian Centre and Dubai Marina Mall. Moreover, in Abu Dhabi, at least six shopping malls are scheduled to open by 2012 which adds to the buoyancy and robust growth of the retail sector throughout the country.
According to a number of observers, shopping malls in the UAE are expected to rise significantly by 2010.

Some observers have estimated that increasing market sentiment in the months ahead will lead to a rising private consumption levels, which in-turn will see the value of retail sales grow by 4% in 2010 and 8.2% in 2011 (see table 2). The retail sub-sectors which are forecasted to show strong growth include pharmaceuticals, automotives and consumer electronics, according to leading UAE retailers.

The key factors behind the strong growth forecast in UAE’s retail sales in 2010 and beyond is the expected increases in household consumption, growing urbanization, high wealth levels as well as an overall improvement in consumer confidence as the worst of the economic crisis is over. One further factor that will assist the retail sector in growing is the success of the Dubai Metro, which started some services in September 2009. With some stations located inside or adjacent to major shopping malls, retailers are expected to see sales rise significantly.

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