JEDDAH – Retail sales in Saudi Arabia are expected to increase by $10 billion in four years from just under $27 billion this year to more than $37 billion in 2015 on the back of strong economic growth in the Kingdom.
In “Q2 2011 Saudi Arabia Retail Report”, Business Monitor International said that nominal GDP in 2011 was predicted to be $414.2 billion, with growth of 3.9 percent expected.
Retail sub-sectors that are predicted to show strong growth over the forecast period include the consumer electronics market, which is one of the largest in the Gulf, accounting for about 40 percent of regional spending, the report said.
Sales in this sector are forecast to increase from an estimated $4.03 billion in 2011 to $5.01 billion by 2015, a rise of nearly 25 percent. “Consumer electronics spend will be driven by youthful demographics, a regional economic boom and a buoyant real estate sector,” BMI said.
High business confidence and increased disposable incomes also provide a favorable background for the automotives sector, the report added.
Vehicle sales are forecast to rise 31 percent by the end of 2015, from an estimated 652,769 units in 2011 to 857,242 units.
Average annual GDP growth of 3.6 percent is predicted by BMI between 2011 and 2015.
With the population increasing from 26.5 million in 2011 to an estimated 28.6 million by 2015, GDP per capita was set to rise 21.4 percent to $18,961 by the end of the forecast period.
“The retail sector benefits from the large number of Muslim tourists visiting the country to take part in the Haj and Umrah pilgrimages every year,” BMI analysts said.
US clothing retailer Gap is among the latest international brands to enter the market. It plans to open 44 Gap stores (and variations) and 10 Banana Republic stores in Saudi Arabia by 2012, the report further said.
Moreover, Saudi Arabia is the largest and fastest growing food market in the GCC region and is home to some of the Gulfs largest food, drink and mass grocery retail companies. One segment that is gaining greater popularity is organic food due to increased consumer concerns over health and safety.
Against this backdrop, the Kingdom’s food and grocery in particular are expected to maintain a strong share of the retail sector and continue to account for almost half of total annual retail value.
The country’s retail sales are projected to hit $97 billion by 2013, fueled by the Kingdom’s robust economy as well as several socio-demographic factors such as rising disposable income, a young population, and an expanding consumer base.
“Saudi Arabia is the largest economy and the top food market in the Gulf. At the same time, it is also evolving as one of the most health-conscious Arab states. It, in fact, has the largest healthcare sector in the Middle East. We have been observing a very noticeable shift toward healthier lifestyles such as eating more nutritional foods, which is reflected by the increase in sales of our organic products,” said Ibrahim Aboabat, general manager, Al Watania Agricultural Company.
© The Saudi Gazette 2011