In 2011, the UAE was rated by Forbes magazine as the world’s sixth wealthiest nation by GDP per capita income, surpassing most developed economies. This means the country is on the top in terms of purchasing power, which is playing a crucial role in keeping the domestic retail sector one of the world’s busiest and most vibrant.
With the announcement of new mega-projects in Dubai, with shopping malls and online market services continuing to mushroom, the domestic economy remaining strong and inflation dipping to a minimal level, experts believe the UAE’s retail sector will steam ahead in the next years. What will give this sector an additional momentum is the sophisticated shopping infrastructure in the country and the so-called Arab Spring, which is luring more tourists into Dubai and the rest of the UAE.
The UAE’s high purchasing power is reflected in its massive family consumption, which involves individual spending on consumer items and services. Formerly second only to Saudi Arabia in the Arab region, the UAE jumped to the top position in 2010, when family consumption stood at Dh575 billion. It maintained that rank in 2011 as consumption leaped to nearly Dh640 billion, more than 15 per cent of the total family consumption in the 21-nation Arab League, according to official Arab data.
The steady surge in family consumption in the UAE, mainly a result of the high per capita income, was manifested in the rapid growth in the retail and wholesale sector’s contribution to GDP over the past years.
Trade to GDP
From around Dh67 billion in 2001, the value of that contribution leaped to Dh90 billion in 2005 and Dh134 billion in 2009. It swelled to Dh138 billion in 2010 before hitting an all time high of around Dh146 billion in 2011. The rise boosted the trade sector’s share of the overall GDP to one of its highest levels of around 11.7 per cent to maintain its position as the second largest component of GDP after the hydrocarbon sector.
“The retail sector in the UAE has grown so fast over the past years that it has become a major contributor to the non-oil economy this growth was driven by many factors, including the presence of a sophisticated shopping infrastructure, the organisation of too many events and occasions every year and the opening of scores of malls and other shopping outlets,” said Mohammed Al Awadi, a prominent businessman in Abu Dhabi. “Other factors include the demographic diversity in the UAE as there are nearly 150 nationalities and cultures this means we are talking about 150 different tastes another major factor is the strong tourism sector in the country, mainly Dubai, which has become one of the world’s dominant retail business destinations,” said Awadi, who controls a big chain of jewellery shops in the country.
Awadi, a former head of the trade committee in the Abu Dhabi Chamber of Commerce and Industry, said he expected the retail activity in the UAE to pick up in the coming years because of the steady population growth, the high per capita and purchasing power, strong economic growth and plans for new mega-projects in Dubai.