Kuwait’s Central Statistical Bureau showed an unprecedented increase in the monthly consumer price index, which amounted to about 4.36 percent during March 2021 on an annual basis. And despite the price increase on luxury items locally and the concerns of a global economic crisis, buying behavior in Kuwait continues to escalate on non-essential products.
Consumer Behavior Consultant Salah Al-Jemaz explained the reasons why local consumers keep spending their money on luxurious products despite the current global economic situation. “People in the Gulf region are not qualified to consume or spend their money with a studied step, especially with the stability of their income; they see that there is no reason to reduce their spendings and save money while the prices keep going up,” he said.
“GCC governments encourage this consuming behavior by constantly supporting its citizens financially, which has led to creating an environment in which the citizen does not take care of his responsibilities,” he argued. “Not to mention the cash flow from the supporting communities such as families, friends or charities institutes.”
Jemaz assured that the social appearance is one of the main problems that affect consumer behavior regarding reducing their spending on luxuries. “We are not telling people to deprive themselves, therefore saving money, good spending or investing in gold helps them avoid future financial crises, especially among the global economic concerns,” he explained.
“Educational institutes in Kuwait should start teaching the coming generation ways of managing their financials, which helps them to prevent inflation, price hikes or reduce the consuming culture,” he added. “When the ministry of finance announced during the pandemic that they will have a shortage regarding the salary disbursement, people, instead of stashing their money, went to malls and spent their money unconsciously.”
On the other hand, Jemaz mentioned that “changes of economic conditions are forcing us to keep pace with the global saving methods. Therefore, gold is the safest way to prevent economic swings, while increasing the monthly income helps to save the surplus.”
Inflation
Regarding inflation and its effect on consumer spending, economist Amer Al-Tamimi, said that “inflation in Kuwait is starting to exceed 4-6 percent, and since basic food commodities in Kuwait are subsidized by the government, inflation does not easily appear in Kuwait as it does in other global countries.”
He added, “In countries such as GCC states which depend on natural resources, consumer behavior will only change when their financial conditions start to be affected by the inflation, which is expected to start in the upcoming 6-12 months. However, if the inflation rate stays as it is, the amount of spending will keep going up.”
To explore more about this issue, Kuwait Times visited several shopping malls and asked people about their spending behaviors on non-essential products in the last three months. Some citizens said that they did not reduce their spending on luxurious items due to their high income, while others think that the global economic concerns are a great opportunity to learn how to manage their finances.
A Kuwaiti couple told Kuwait Times that they did not reduce their spending on luxury products, saying, “the price hikes are a normal result for the current global economic situation, while we are expecting that the economic issue will not be as bad as speculated.”
“After the prices of luxury items started to increase to more than 20 percent, I started to buy international brands so I won’t spend my money on perishable products,” a female citizen said, mentioning that the current economic crisis is “over-exaggerated.”
Spending less
Another citizen started to spend less on luxury products worrying about a potential crisis or price hikes especially on basic goods, adding that “prices have already started to increase, mostly on non-essential products such as make-ups, clothes, and perfumes.” An expat said that she started to spend less than before as prices on luxury products started to increase and, in some cases, “exceeded 15 percent of the original price”.
Regarding consumer spending, a salesman in a phone accessory shop confirmed that there is a notable increase in purchases by consumers in the last three months, according to the variety of products. Meanwhile, salesmen in a sports shop said that the demand for sportswear started to increase after the pandemic and the lockdowns and reached its highest in the last six months. “We noticed 15-20 percent increase in our profits for this year compared to last year,” they added.
On another hand, a business owner said that there was a decline in sales this year due to the price differences compared to markets abroad, noting that people started to save money by buying their luxury needs while traveling. Another shop owner said that his business sales are down by 20 percent due the recent global economic situation./KT
