Retail growth in the UAE is backed by competitive offerings rolled out across main shopping destinations
There is a high penetration of digital banking among the UAE population, with 82 per cent of UAE retail customers using at least one digital banking channel.
In Saudi Arabia, retail activity is mainly spread across food, beverages and consumer spending. Riyadh and Jeddah are the major cities and house about 60 malls, constituting a bulk of the retail sector.
The slowdown in Saudi Arabia's economic activity on account of the fall in oil prices will impact retail spend and bank lending. The value of retail loans, credit card loans and real estate loans registered a growth of 8.1 per cent YOY (year on year) in H1 2015 as compared to 10.9 per cent YOY over the same period last year.
Retail loans, which comprise loans for renovation and home improvement, vehicles and transport means, extended by Saudi banks in 2015 was SAR627.8 billion by the end of the first half of 2015, up 4.7 per cent YOY. Fresh consumer credit card loans reached SAR19.2 billion and surged 10.8 per cent YOY in the first half of 2015. New real estate loans totalled SR193.7 billion by mid-2015, surging 20.2 per cent.
Retail growth in the UAE is backed by competitive offerings rolled out across main shopping destinations. The factors that have contributed to the shopping environment are new brands, shopping outlets with easy accessibility, regular entertainment activities and attractive offers.
There is a high penetration of digital banking among the UAE population, with 82 per cent of UAE retail customers using at least one digital banking channel. UAE consumers perform online banking via a mobile device and prefer using mobile applications. There is a shift in the distribution framework from branch channels towards digital channels. The drop in oil prices will impact retail spending activities. Bank credit to the retail trade dropped by close to 14 per cent in 2014 YOY and close to eight per cent during the first half of 2015. Personal loans witnessed a growth of close to two per cent YTD (year to date) in the first half of 2015. In the same period previous year, they witnessed a growth of 3.6 per cent YTD. The slowdown in the property sector will also impact mortgage lending in the UAE.
Kuwait's population supports a number of luxury and high-street brand names and the emirate's increased urbanisation is driving growth within organised retail. Kuwait retail sales have grown by around two per cent in the last two years.
Loan growth was driven mainly by strong demand for infrastructure project financing and retail banking in the last two years. However, this year, retail lending will be curtailed on account of the fall in oil prices and tightening of consumer lending. Retail spending by Kuwait nationals can give some boost for retail activity. Qatar's population crossed the 2.34 million mark in June 2015. Qatar's ongoing population boom and its infrastructure development ahead of the 2022 World Cup can drive supermarket sales for the coming years. Luxury goods are also an area which will invoke interest in the Qatar market. Gulf Mall, North Gate Mall, Mall of Qatar, Doha Festival City and Marina Mall are some of the major retail developments which will contribute to Qatar's retail story in the coming years.
In Qatar, retail lending has surged by more than 15 per cent YTD till June 2015 to QR114.2 billion riyals. In the same period in the previous year, retail lending in Qatar had grown by more than 8.7 per cent YTD. Qatar's retail activity continues to grow.
In Oman, retail activity is expected to pick up on increase in government spending though the fall in oil prices can impact sentiment. Oman's budget of 2015 has set out a 4.5 per cent increase in state spending, including wage rises for public servants and higher investment in infrastructure. The expansion of retail hypermarket chain Lulu and more developments in housing and community services will give a push to retail.
In the near term, GCC economies may face a slowdown on account of oil prices which can impact retail spending. However, it is going to be one of the key enablers for GCC economies and will also be a segment which bankers will look forward to reach the customer through digital solutions.
The writer is group CEO of Doha Bank. Views expressed by him are his own and do not reflect the newspaper's policy.