KARACHI: The Mastercard Economics Institute released their annual forecast for the coming year which shows how a new multi-speed global economy will impact growth and consumer spending behavior. A multi-speed global economy means some markets will feel the impact of inflation and rising interest rates more keenly.

‘Economic Outlook 2023’ draws on a multitude of public and proprietary data sets, as well as models that are intended to estimate economic activity across the Eastern Europe, Middle East and Africa (EEMEA) region.

The report 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 omni channel.

After years of a housing boom, higher interest rates are expected to squeeze cost of living budgets, shifting the way consumers spend broadly. In major developed countries, we expect housing-related spending as a share of goods to fall an estimated 4.5 percent over the course of 2023, below pre-pandemic levels.

In South Africa, housing related share of spend decreased by 1 percentage point in 2022 versus 2019.

In the UAE and Saudi Arabia (KSA), housing-related spend remained at the same levels (5.90% for UAE and 10.9% for KSA) in 2022 as compared to 2019.

Broad spending should remain resilient in the face of inflation, with consumers choosing wallet-friendly brands and chasing the best value. Globally, grocery shoppers made31% more trips to the store this year compared to 2019 – partially to reduce food waste – while their average spend per visit is roughly 9 percent lower.

As of September 2022, consumers in the UAE increased their grocery shopping trips by 28 percent compared to September 2019 but spent 21.4 percent less per visit.

Restaurant spending frequency in the UAE was nearly 30 percent higher in September 2022 than in September 2019, while the average ticket size was nearly 20 percent lower as even higher income consumers rein in excess.

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, we saw discretionary spending3 by high income households grow nearlay twice as fast as lower-income households.

Many markets in the Middle East and Africa show a larger gap between the affluent and non-affluent households in 2019 vs 2022 discretionary spending – Morocco (71pc), Madagascar (70pc), Jordan (60pc), Senegal (55pc), Kenya (39pc) and Zambia (34pc).

Copyright Business Recorder, 2022


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