A global survey says consumer confidence in the UAE has taken the hardest hit following Dubai World's call for a debt standstill.
Consumer confidence 'hit hardest in UAE'
DUBAI // Consumer confidence in the UAE has taken the hardest hit in a global survey, after Dubai World's call for a debt standstill shook residents. The Emirates' consumer sentiment reading last month fell 10 points to 92, the biggest drop of the 29 markets in a worldwide survey conducted by Nielsen and released Wednesday.
Himanshu Vashishtha, the managing director of Nielsen in Dubai, said the steep fall in the local consumer mood was linked to Dubai's announcement in late November, on the eve of Eid al Adha. "Dubai World's announcement that it is seeking to delay repayment of a loan caught everyone by surprise and sent shock waves around the world," Mr Vashishtha said. "And given the initial uncertainty around the Dubai World crisis, it is likely to have spooked the consumers in UAE. This was too close to home for them to ignore and raised concerns about another imminent crisis."
The UAE had a record rise in consumer sentiment in October last year, which was up 13 points to 102 in the Nielsen poll. The UAE has also been knocked out of the 10 most optimistic countries, a spot it has held since 2006 and managed to maintain in Nielsen's poll of May last year, despite its confidence falling a record 21 points. But residents in the Emirates continued to be optimistic that the downturn would be over by the end of this year, said James Russo, the vice president of global consumer insights at Nielsen.
Consumer confidence across the 17,500 internet users in 29 markets rose five points between June and December, to 87. The data showed that consumers were spending more on items such as entertainment, clothing and vacations. The top three most optimistic markets were Indonesia, India and Brazil. Confidence in Hong Kong recorded the highest jump, up seven index points to 100. South Korea and Japan were the least confident, data showed.
Consumers had become more optimistic about their countries emerging from recession with better job prospects and personal finances, said Mr Russo. "However, while purse strings may be loosening in some markets, there is clearly a big difference in the pace of expected recovery between the emerging and developed markets, and consumers' increased confidence is not yet translating into a widespread readiness to start spending," he said.
People's perceptions of their own financial outlook for this year also improved, with 48 per cent saying it would be excellent or good compared with 43 per cent six months ago. The economy and job security are still top concerns. Mr Vashishtha said the mood in the UAE had probably improved since the survey, which was conducted between December 4 and 18. It was done when the details surrounding Dubai World's debt situation were "ambiguous" and before Abu Dhabi's US$10 billion (Dh36.73bn) relief package, he said.
"With Abu Dhabi agreeing to a new bond issue, in addition to a likely rescheduling of some loans, and new bankruptcy law, it is bound to show some improvements in consumer confidence in UAE in the next wave," Mr Vashishtha said. "Consumers in UAE will recover their confidence but maybe at a slower pace." @Email:email@example.com