The Mastercard Economics Institute released its annual forecast for the coming year, which shows how a new multi-speed global economy will affect growth and consumer spending behavior. The report indicates that some markets will feel the impact of inflation and rising interest rates more keenly.
‘Economic Outlook 2023’ draws on a multitude of public and proprietary data sets, as well as models that are intended to estimate economic activity across the Eastern Europe, Middle East and Africa (EEMEA) region.
The report explores four themes that will continue to shape the global economic environment — high interest rates and housing, trading down and shopping, prices and preferences, and shocks and omnichannel.
- As food and energy costs eat up a greater share of the consumer budget, lower-income households will feel a firm pinch. From 2019 to 2022, discretionary spending by high-income households grew nearly twice as fast as for lower-income families. However, much of this gap will diminish with the normalization of inflation. The Mastercard Economics Institute expects inflationary pressure to ease next year, with the average inflation rate of developed economies falling from 7.1% YOY in Q4 2022 to 3.1% YOY in Q4 2023.
- Many markets in the Middle East and Africa show a larger gap between affluent and non-affluent households in 2019 vs 2022 discretionary spending, e.g., Morocco with 71% and Jordan with 60%.
- Qatar, however, is bucking the trend. From 2019 to 2022, discretionary spending for affluent cardholders surged by 104.9% while discretionary spending for non-affluent cardholders increased by 103.9% – a difference of one percentage point.
- After years of a housing boom, higher interest rates are poised to squeeze cost-of-living budgets, shifting how consumers spend broadly. In major developed countries, the outlook anticipates housing-related spending as a share of goods to fall an estimated 4.5% over the course of 2023, below pre-pandemic levels.
- In most EEMEA markets, housing-related spending remained at the same levels in 2022 as in 2019.
- Overall spending should maintain resilience in the face of inflation, with consumers choosing wallet-friendly brands and chasing the best value. Globally, grocery shoppers made 31% more trips to the store this year compared to 2019 – partially to reduce food waste – while their average spend per visit was roughly 9% lower.
- Businesses with an omnichannel presence are likelier to withstand shocks by meeting customers where they want to shop. The analysis suggests that having a multichannel presence provided a six-percentage-point lift in retail sector sales through 2022. Small and large restaurants were saved from losing an additional 31% of sales during the height of lockdowns with their omnichannel presence. Similarly, small omnichannel clothing stores outperformed online-only and brick-and-mortar-only firms, growing 10% and 26% faster, respectively.