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ANALYSIS

Saudi consumer sentiment strong despite low oil prices

DUBAI, April 24, 2016

Despite the free fall in oil prices in 2015, Saudi Arabia’s consumer appetite for spending remains strong, with most Saudis envisaging an increase in their spending on general discretionary products, a report said.

The consumer has been insulated from the pressures which the oil price weakness may have had on other aspects of the economy, given a strong buffer of foreign exchange reserves, low levels of debt and a currency that remains robust, explained the sixth annual Emerging Consumer Survey – a detailed study profiling consumer sentiment and its drivers across the emerging world – published by the Credit Suisse Research Institute of Credit Suisse, one of the world's leading financial services providers.

“Perhaps surprisingly, the Saudi Arabian consumer moved up to share the number two spot on our consumer confidence scorecard, from the fifth spot last year,” the report said.

Saudi Arabia again ranked best among when asked “In your opinion is now a good time to make a major purchase?”. Fifty-three per cent of the respondents voted that it was at least a good time for a major purchase, and 23 per cent of those thought it was an excellent time.

“Again this year we see a continuation of the trend where the highest income earners are the most optimistic about the state of their personal finances. We believe Saudis remain positive about the outlook of their personal finances due to their expectation that the government will continue to support private consumption by disbursing bonus salaries, although we believe it is unlikely this year,” the report said.

Market penetration in Saudi Arabia remains high across products, with above 90 per cent levels for items such as computers, cars and smartphones. This indicates that the opportunity in some areas lies in product substitution rather than increased penetration. There is, however, an important caveat, according to Credit Suisse.

The survey may not fully reflect the impact of the 2016 budget announced at the turn of the year when the government announced for the first time an increase in gasoline prices as part of an overall review of subsidies levels (fuel, electricity, water, etc). The budget hinted at the introduction of fees and taxation which has been common in several Gulf Cooperation Council countries so far. Both previously mentioned initiatives are set to put relative pressure on the Saudi consumer’s purchasing power in the future.

Stefano Natella, head of Global Market’s Research at Credit Suisse, said: “Our study continues to provide a timely insight into the drivers of consumer sentiment across the emerging world. Our analysis suggests that over the last two years, approaching 100 million new households across our survey countries have found their way into the middle class.

“Aided by innovations in technology, e-commerce and an optimism broadly driven by the younger consumer, the analysis delivered in this report continues to suggest that even in a challenging economic cycle, structural investment opportunities will continue to benefit investors.”

Giles Keating, deputy global chief investment officer at Credit Suisse, said: “Weak currencies, political risk and commodity exposures all contributed to the wide range of consumer sentiment expressed in this year’s report. The negativity of in Russia, South Africa and Brazil contrasted sharply with the relative optimism apparent in India, China and Saudi Arabia.

“A granular understanding of the factors in play is key for investors looking to judge the range of risks and opportunities across these markets. The depth of analysis delivered in this report underlines the ambition of the Credit Suisse Research Institute to provide such guidance to clients and assist their investment and corporate strategies.” – TradeArabia News Service




Tags: Credit Suisse | Commodity |

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