Soaring prices have allied with a steady population growth to sharply boost individual spending in the UAE and maintain its position as the top Arab nation in terms of consumer expenditure, official figures showed yesterday.
From Dh329.7 billion in 2006, the UAE final consumer spending jumped by more than 20 per cent to a record Dh396.05bn in 2007, the Central Bank said in a study. Private consumption, which covers spending by individuals and families on domestic commodities and services, soared by 17.7 per cent from Dh271.7bn in 2006 to Dh319.8bn in 2007. Government consumer spending leaped by 33 per cent from Dh57.9bn to Dh76.19bn in the same period.
The surge in the private consumption last year meant the UAE individual spent an average Dh72,500 compared to around Dh64,065 in 2006 and only Dh23,000 in 1998.
The level in 2006 and 2007 was by far the highest in the Arab world, where Qatar emerged as the second-largest consumer spender, with Dh54,000 in 2007 and Dh45,800 in 2006, according to figures by the Arab League's annual report.
"The final consumer spending, which involves both government and private spending, grew by nearly 20.1 per cent last year and this boosted its ratio to 54.8 per cent from 53.3 per cent of the gross domestic product," the Central Bank said.
"The increase in public spending was mainly a result of the population growth while the increase in private consumption of 17.7 per cent was caused by both the population growth and the increase in domestic prices." Experts said the surge in consumer spending in the UAE over the past few years has been accompanied by a sharp rise in its per capita income because of a rapid growth in the GDP, which outpaced the average 6-7 per cent growth in the population.
In 2007, the GDP surged by around 16.8 per cent to Dh729.7bn from Dh624.6bn in 2006 while the population grew by 6.1 per cent to 4.488 million from 4.229 million.
The growth in the nominal GDP boosted the country's per capita income to nearly Dh168,893 last year from around Dh148,014 in 2006, the Central Bank figures showed.
Although it topped Arab countries in consumer expenditure, the UAE far lagged behind Qatar in terms of the per capita income, which exceeded Dh250,000 last year, one of the highest GDP per capita incomes in the world. Economists said the surge in private consumer spending in the UAE last year was mainly a result of inflation on the grounds the surge far surpassed the population growth.
"Private consumer spending in the UAE has grown at an average 10 per cent in previous years but it soared by double that level in 2007 because of the sharp rise in prices rather than the population growth," said Fouad Zeidan, an Abu Dhabi-based economist. Inflation in the UAE was officially put at 11.1 per cent in 2007, far higher than the 9.4 per cent in 2006 and more than triple its level in late 1990s and early 2000s. Officials have blamed soaring rents and food prices, the fall in the dollar and the rise in global prices.
The absence of major wage increases in the private sector has combined with inflationary pressures to sharply boost personal loans provided by the UAE banks to residents. From Dh31.2bn at the end of 2006, the total bank personal loans for consumer purposes leaped to Dh43.4bn at the end of 2007 while loans for commercial and business purposes soared from Dh87.9bn to Dh110.3bn.
Despite soaring domestic spending and high inflation rates, cash remittances by the UAE's dominant expatriate community increased to a record Dh31.9bn last year from around Dh28bn in 2006, according to the Central Bank.
Bankers said consumer over-spending in the UAE was also a result of the country's rapid economic growth, liberalism and socio-economic stability, which in turn has resulted in a rapid growth in private investment.
Central Bank figures showed the total private fixed capital formation (investments) leaped to a record Dh84.3bn in 2007 from Dh66.3bn in 2006.
Investments accounted for nearly 56 per cent of the total capital formation of Dh148.4bn in 2007.