Consumer confidence in the Middle East

Mastercard recently released its twice yearly survey of consumer confidence in the Middle East. The report is thorough and makes for very interesting reading. One note of caution, however: Mastercard respondents were required to have a regular income, a bank account, and be 18 yrs or older. The survey was also conducted by phone and computer, which would have limited the respondent pool. According to the footnotes on the survey, Mastercard had about 3,400 respondents over 7 countries with several cities in some countries (for example Egypt) being polled. Included in the survey are Egypt, Kuwait, Saudi Arabia, Lebanon, Qatar, UAE, and South Africa. The questions ask the respondents to look ahead six months and forecast what their financial situation would look like.

The results of the survey were mixed but in surprising ways. Consumer confidence was down in the UAE (and below historic norms), Saudi Arabia, and Qatar but up in Lebanon and Egypt. Confidence levels also reached record highs in Kuwait. The results of the consumer confidence survey, which Mastercard has conducted for 5 years in the region, were combined this year with Mastercard's first ever index of consumer purchasing priorities in the region. Most respondents anticipated spending the most money on their children's education and dining and entertaining. (The categories were not further explained.) The exception to this were UAE respondents who anticipated spending most on property. The majority of respondents anticipated savings rates in the double digits this year. To view Mastercard's findings, use this link: Global Crisis and Consumer Confidence, Savings, and Spending Priorities in Middle East and Africa

I am not particularly surprised by the results from the UAE, especially since credit markets there really began to seize up in the autumn, directly before the survey was in the field. Likewise, consumers in Saudi and Qatar have probably been affected by the bad news coming out of the west and the dismal results of their own stock markets of late. Kuwait puzzles me to no end, however. While the country (and economy) as a whole arguably has little to worry about given Kuwait's substantial reserve position, the survey, which was conducted between mid-October to mid-November 2008, was in the field during the time that Arab Bank announced its $800 million loss requiring it to be bailed out by the government. The Kuwait stock exchange was shut down at least twice in late October when traders protested for more government action and trading was actually suspended after Arab Bank's announcement. It's hard to imagine that Kuwaiti consumers couldn't have been moved at all by this news.

Egypt and Lebanon are also a bit surprising but I imagine, for Egypt, the uptick in confidence may have come from an easing of inflation more than anything. I should note here that consumer confidence in Egypt, even with its rise, is still well below levels in the Gulf. Certainly, no one could ignore the likelihood of smaller growth and lower investment rates. In Lebanon, the uptick may have come about as a result of the decline in inflation as well as a certain calm that has descended in the country as all the players seem to be abiding by the Doha agreements.

Even with movements in confidence, one can't help but suspect that consumers in the Middle East remain relatively uneducated about global and local economic conditions. Overall confidence levels in the second half of 2008 are higher than they were in the first half (again the inflation effect, my guess), and with the exception of expectations of the economy, most are very bullish about their income, employment prospects, and quality of life for the first half of this year. It's almost as if respondents didn't anticipate a downturn in the economy having any affect on them at all. I imagine if such a poll was conducted in the west at this point, the result would be just the opposite.

Definitely something to puzzle over.