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Why the Middle East is becoming one of the fastest growing luxury markets

Dubai’s continued focus on attracting tourists and foreign expatriates, as well as its diversification away from oil, are helping boost luxury spending

A display of luxury handbags at Palazzo Fendi, Fendi's flagship store, in Rome (Bloomberg)

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The Middle East is expected to become one of the fastest growing markets for luxury in 2023, according to Barclays Plc analysts, with the owners of Louis Vuitton and Cartier best placed to benefit.

Analysts at the bank cited high oil prices that underpin buoyant economic conditions and demographic trends for their optimistic call on the region. Dubai’s continued focus on attracting tourists and foreign expatriates, as well as its diversification away from oil are also factors that will boost luxury spending. 

Also read: How Bernard Arnault built LVMH into a global luxury empire

LVMH Moet Hennessy Louis Vuitton SE, the owner of Louis Vuitton and Christian Dior, and Richemont, which makes Cartier jewellery and watches, will be beneficiaries of the Middle East’s luxury growth, according to the broker. 

“The broad outlook for the region remains much more positive than for western economies, with GDP growth forecasts being revised up at a time of downward revisions for most countries globally,” analysts including Yasmin Clark and Carole Madjo said in a research note on Friday.

The Arab Gulf has been somewhat shielded from an economic slowdown that’s hit much of Europe, the US and China. Dubai, a member of the United Arab Emirates, has seen its gross domestic product rise an annual 4.6% during the first nine months of 2022 and drew nearly 13 million tourists up until November. Dubai also intends to increase its spending and focus on priority sectors, among them luxury and leisure.

Within the region, Barclays sees the most opportunity in Saudi Arabia, where luxury brands only have a small presence. The analysts also highlighted the prospect of Qatar attracting tourists for events such as the Qatar Grand Prix and the AFC Asian Cup since the 2022 FIFA World Cup, a potential return of Chinese tourists to the UAE, and the opening of a new luxury mall in Riyadh as potential catalysts that could bolster luxury sales in the region.

According to Barclays, the Middle East is set to account for 8% of luxury goods sales globally by 2030, up from 5% currently. 

Also read: Asia's love for Louis Vuitton bags is helping LVMH stay strong

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