The Mastercard Economics Institute released ‘Economic Outlook 2024’, its annual report identifying the themes that will define the economic landscape. While the global economy will feel more “normal” in the coming year than the prior three, it will still be an economy seeking equilibrium, with a careful balancing of high interest rates, salaries and prices compared to pre-pandemic levels, found the report. The backdrop, however, remains one of consumer empowerment with moderating inflation and steady real economic growth, but with varied regional dynamics.
In the MENA region, it is anticipated that consumers and businesses will face crucial decisions about spending and investing, where price differentials and interest rates have burrowed into budgets, informing the resources available with less wiggle room. In 2024, the Mastercard Economics Institute expects real consumer spending year over year, to increase by 5% in the United Arab Emirates (UAE), 4.3% in Saudi Arabia and 1.2% in Egypt.
Expansionary fiscal policy is set to continue to support growth in the Gulf Cooperation Council (GCC) countries. Furthermore, a significant investment drive for more development through giga projects is underway in Saudi Arabia, and the UAE seeks to maintain its traditional position as the regional trade and investment hub. Meanwhile, Egypt is tightening policy to reduce macroeconomic imbalances. Tourism will likely remain a bright spot for many of the region’s economies.
“While economies in the MENA region are impacted by several factors including geopolitical conflict, cost of living instability and currency fluctuations, strong government visions are providing a supportive foundation for economic stability. This is encouraging empowered and resilient consumers to confidently take charge of their needs and wants within the constraints of available resources,” said David Mann, Chief Economist, Asia Pacific and EEMEA, Mastercard. “A strong labor market underpins consumer purchasing power and the Mastercard Economics Institute anticipate the easing of monetary policy will help sustain consumer spend in interest-sensitive sectors.”
Key findings from the report include:
Spending is prioritized on ‘needs’ and ‘wants’
Even with inflation taking a larger chunk of spending on essentials, consumers will prioritize the discretionary spending that matters most, with travel, events, live concerts, and movies remaining popular choices, evident in the consumer attention captured by Taylor Swift’s The Eras Tour and “Barbenheimer”.
The MENA region is seeing a particular boost from tourism: Egypt and Tunisia were in the top five fastest-growing destinations for Europeans in 2023 compared to 2022. Meanwhile, the GCC’s strong push to grow its tourism sector have made the region one of the world’s fastest-growing destinations. In 2023, the GCC is estimated to have registered 22% increase in inbound tourist spending compared to 2019, 26 percentage points higher than the global average.
The living room as a dressing room, e-commerce returns outpace that of in-store
With supply chains finally untangled, consumers can once again wait until the last minute for purchases with few constraints, and perhaps add more options to cart to try on at home. Paired with the pandemic-fueled acceleration of businesses going online for the first time, increased returns may point to increased customer loyalty, where shoppers’ growing comfort with e-commerce increases sales and returns — and also repeat visits.
Across 10 economies, the rate of returns for online transactions grew from 2019 to 2023, but it remained relatively unchanged in store. In the GCC, this was particularly pronounced, with the e-commerce rate of return increasing by 13.2% in the UAE and 12.4% in Saudi Arabia.
Inflationary pressures begin to ease as central banks course-correct
Central banks are likely at or close to peak rates, according to the Mastercard Economics Institute. Some easing is expected next year as inflation cools while growth remains subdued, prompting a partial normalization of monetary policy.
Globally, the Mastercard Economics Institute expects inflation to moderate to 4.9% year over year in 2024, down from 6% in 2023, but remaining above the pre-pandemic trend of 2.7%. Despite that, the Institute predicts global economic growth in the coming year to feel similar to 2023, and anticipate inflation-adjusted GDP to grow 2.9% year over year in 2024.
The “Economic Outlook 2024” report draws on a multitude of public and proprietary data sets, including aggregated and anonymized Mastercard sales activity, as well as models that are intended to estimate economic activity.