The consumer sector across the Gulf Co-operation Council (GCC) is structurally poised to outperform advanced economy peers for decades, driven by unique demographics, strong labour supply, and improving human capital, according to a research briefing by Oxford Economics.
The report, “Which structural factors will support GCC consumers,” forecasts robust, long-term growth in household consumption, supported by factors that largely negate the economic drag faced by ageing populations elsewhere in the world.
The GCC’s youthful population and low age dependency ratios are central to this bullish outlook. Oxford Economics’ new head of GCC macroeconomic analysis Azad Zangana explained that this demographic structure ensures government spending is not significantly burdened by rising age-related costs.
“Favourable demographics negate the challenges associated with ageing populations seen elsewhere in the world,” Mr Zangana noted.
The report highlights that the International Monetary Fund (IMF) estimates that age-related spending will increase by 2.1 per cent of GDP for the advanced G20 economies. In contrast, the UAE, Qatar, Oman, and Bahrain are all forecast to see an increase of less than half a percentage point of GDP, meaning GCC households are far less likely to feel a significant strain on their finances from supporting older populations.
The youthful base also promises future spending power. “We project an increase in consumption per capita growth based on youthful demographics,” Mr Zangana said. “As the population ages, it enters a bracket that sees substantially higher income and spending, resulting in higher consumption per capita.”
This shift frees up higher disposable income for consumers to spend on consumer and durable goods.
Aggregate consumption is further supported by an expanding labour supply, driven by three key factors: youthful demographics, high migration rates, and rising labour participation.
The research noted that high migration rates contribute significantly to maintaining the youthful profile. Most migrants, predominantly low-skilled workers, maintain high saving rates, remit earnings, and “return to their countries of origin upon retirement.”
This cycle helps the GCC sustain its advantageous population structure.
Additionally, structural reforms aimed at boosting labour participation and educational attainment are beginning to yield positive results, providing long-term upside for consumption.
While progress is evident, the report noted that there is “still plenty of room for development” in education. The UAE was cited as the best performer among GCC nations in increasing the average years of completed education among its working-age population, nearly attaining US levels. In contrast, Kuwait registered lower attainment increases, trailing the US by a larger margin.
Overall, the report concluded that while energy sectors will remain central to GCC economies, the underlying structural factors will ensure the consumer sector demonstrates sustained outperformance.
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