If confidence wobbles, expect the government to act before shoppers feel it. Federal and emirate authorities are likely to step in if the conflict drag persists, using fiscal firepower to cushion retailers through direct support and subsidies for essential goods and services, according to an article from Fitch Solutions’ BMI. The agency is explicit that this will help largely mitigate short-term risks to retail.

Direct subsidies could be on the table: Any inflationary risks — which are possible due to rising shipping costs, delayed transport, and risk surcharges — will “likely be mitigated by intervention from the UAE government, which has substantial fiscal capacity to provide direct support to businesses and subsidize essential goods and services,” BMI says. How far they will go will depend on the duration and severity of the conflict, it added.

…as could be more incentives for expats: One of the biggest concerns for the retail sector is a softening of expat inflows due to the tarnishing of the UAE’s “safe-haven” appeal. But BMI expects policymakers to lean harder on the same toolkit used before — more visa liberalization, visible security spending, and lifestyle incentives to keep expat inflows steady.

Still, lower tourism footfall will be an issue: The UAE could lose around 5.9 mn tourists at the lower end of a projected 20-45% decline in footfall this year, and up to 13.3 mn at the higher end, potentially costing the economy mns of USD in lost tourist inflows — particularly impacting the luxury sector, which has been booming in recent years.

Our take

The initial consumer pullback and disruptions across stores — both physical and e-commerce — are hardly felt if you go for a stroll through the mall. Yes, some luxury stores temporarily shut and staffing thinned in the first days of strikes, but malls are near full capacity once again, Amazon operations have largely normalized, and the feared retail freeze has so far looked more like a brief interruption than a lasting pullback.

The trouble comes if shipping disruptions persist. While airspace disruptions have let up a bit, with airlines gradually bringing scheduled flights back, it’s still not at full capacity, and a prolonged war would mean significant delays in shipments and higher surcharges that are bound to be passed on to consumers.

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