The rising confidence and purchasing power of Kuwaiti consumers combined with solid expectations of the country’s growth bode well for activity at check-out counters in the coming months.
The Kuwaiti economy will expand by 2.1 percent this year, ratings agency Moody’s Investor Service forecast in September, with GDP growth to more than double in 2011 to 4.5 percent. The group also expects inflation to stabilize at 4 percent before falling back to 3.4 percent in 2011. The economic growth and easing of inflation are both expected to encourage consumer spending.
Further signs that a growing number of Kuwait’s consumers will be inclined to open their wallets in 2011 is a recent 5.5 point rise in the country’s Propensity to Consume Index (PCI) – the proportion of annual income spent on consumption of goods and services ¬– recorded in a survey conducted last month by online employment agency Bayt.com and research specialists YouGov Siraj.
The Consumer Confidence Index survey, a measure of consumer expectations and various elements of the economy including inflation, job opportunities and the cost of living, also found that 50 percent of Kuwaitis were optimistic that the economy will improve and that 51 percent were confident in the future of their personal finances. Just 4 percent believed they would be worse off in 2011.
This confidence is expected to be reflected in overall sales, and research group Companiesandmarkets.com predicting in September the value of sales will rise from $7.55 billion in 2010 to $10.04 billion by 2014.
Sub-sectors expected to show strong growth are consumer electronics, with sales expected to rise nearly 31 percent, and over-the-counter pharmaceuticals, with an increase of 32 percent over the next four years.
Meanwhile, the pool of potential customers is also showing growth, with a larger proportion of Kuwait’s population now in what is considered the highest spending bracket. While some 39 percent of the population is aged between 20 and 44, over 75 percent are deemed economically active.
To meet the increased retail needs of the rising number of wealthy consumers, by the end of this year there will be over 1 million sq meters of retail space spread across the Emirate, up from just under 350,000 sq meters five years ago. Like the country’s population, most of the leaseable floor space is concentrated in urban areas, mainly in Kuwait City.
The rising confidence in the economy is likely to see off chances of parliament reviving a $23.3 billion bailout of consumer loans, which it had sought in the aftermath of the financial crisis. The government has successfully rejected the law several times over the past nine months.
While there have been some reports that the development of new shopping centers and retail space has trended down, with the improved economic climate in Kuwait, it can be expected that new projects will be unveiled in the short- to medium-term as consumer confidence is backed up with consumers’ cash.
