Many countries are seeing downward revisions to their consumer spending forecasts
While high-income consumers will remain resilient, middle-income purchasing power faces pressures, and consumers will change their purchasing habits to account for higher prices of basic goods and utilities. MNCs need to frequently revise prices, monitor consumer sentiment and competitor moves closely, and maintain marketing budgets in a highly volatile outlook.
Many countries are seeing downward revisions to their consumer spending forecasts.
Egypt’s, Morocco’s, and Lebanon’s consumer spending growth will be lower than expected, as the markets rely on high food imports, face potential currency volatility, and have already-vulnerable consumer bases. Saudi consumers are some of the most protected in the region, with relatively fewer inflationary pressures and potential fiscal buffers for subsidies, but the high base effect from 2021 and still-rising prices could ease consumption growth. In the UAE, we still expect the fastest consumer spending growth within the region for 2022; however, we have revised our expectations slightly due to potentially fewer tourist arrivals and rapidly rising inflation, which is partially offsetting the large Russian influx.
Additionally, markets with no revisions still face downward risks. Where we haven’t yet made revisions, we still have a downward bias to our forecasts. For Iraq, a low base effect and potential continuation of public sector salaries and subsidies could support consumers; however, a downward revision in our May forecasting round is highly likely. For Iran, already-moderate consumer spending is forecasted after very low figures in the last few years. Higher subsidy potential due to greater oil revenues and an extremely high inflation environment that consumers are accustomed to may buoy consumer spending figures. In Qatar, although a major boost to the 2022 forecast is coming from the World Cup and that is likely to remain a key driver, there is potential for a slight downward revision due to eroding consumer purchasing power in Europe and the potential loss of Ukrainian and Russian tourist arrivals.
As Russia, Ukraine, and Europe see downward revisions to their forecasts, many MNCs are looking at the Middle East and Africa, especially commodity-exporting countries, to support portfolio performance. However, Russia’s invasion of Ukraine is also disrupting MENA’s consumer spending recovery that was originally expected for 2022. While oil exporters are experiencing windfall revenues, these are not at all trickling through to consumers, and many oil importers are facing challenges in curbing inflation. Rising global food and transportation costs are creating negative effects across the region and inhibiting consumption growth.
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