‘Clear upturn’ in GCC business confidence
Business confidence across the GCC region showed “a clear upturn” in the second quarter with optimism in the UAE going “from strength to strength this year,” the latest HSBC survey reveals.
“Businesses have stayed steady in overall performance over the last few quarters, and, more positively, companies are telling us that they are actually planning to hire,” said Alain Renaud, co-Head of Global Banking, HSBC.
“When we look specifically at the UAE, confidence is up nearly two full points at 82.9,” he said while presenting the HSBC Gulf Cooperation Council Business Confidence Index, or BCI, which has been tracking regional market sentiment since 2007.
This quarter, a 1.7 point rise in the overall confidence index has been matched by both a gain in the number of companies positive towards both investment budgets and hiring, suggesting that companies are in growth mode, said Renaud.
“Overall confidence across the GCC is up, but what is perhaps more interesting is the positive attitude we’re seeing amongst respondents. Three in five of the companies surveyed believe that their organisations’ performance will continue to improve and nearly 40 per cent think that their customer numbers will increase overall,” said Renaud.
In June, HSBC also attempted to track the impact of the regional unrest on business confidence. Surprisingly, while 60 per cent of respondents believe that the current political unrest will negatively impact their business, this has not impacted their access to credit – with 51 per cent of respondents stating that their access to credit is the same as last year, and 40 per cent claiming that the situation has improved, he said.
“The Arab spring’s impact on confidence was felt last quarter, but while this still remains a concern for companies — 60 per cent of companies across the GCC think that it will impact businesses — there are signs that companies are looking beyond this. Staffing levels look set to rise and many companies expect profits to rise and staffing levels to improve,” he said.
According to another survey, top executives in Saudi Arabia, the UAE, and Qatar remain confident about business prospects in the region despite unrest elsewhere in the Middle East.
Oliver Wyman/IBOPE Zogby International survey, which interviewed 160 leading executives in the GCC found that business confidence levels, which have improved steadily since 2009, have continued to rise, especially in the UAE.
“One interesting aspect this quarter is that firms access to credit has not dipped. Credit supply is the lifeblood of many companies so this is a key measure of health, and a good indicator of future growth. The data tells us that 51 per cent of companies believe they their firm’s access to credit remains the same as last year, and 15 per cent tell us that the situation has actually improved. This compares very favourably to the nine per cent who feel that this is getting worse”.
HSBC also started to track regional companies expectations of trade with other countries. “A clear trend is emerging, while many GCC companies expect trade with other Middle East countries to slow slightly, 44 per cent of respondents expect trade with China to increase and 30 per cent expect to increase trade with Asia Pacific. This data is looking squarely at the next quarter of this year, showing that regional companies are planning to do this right now. This is entirely in line with HSBC’s view that the Middle East will benefit from these Emerging Market, ‘south-south’ trade flows,” said Renaud.
Saudi Arabia with 2.8 points increment leads the way in return of the market confidence. Interestingly Bahrain gains 2.1 points after a drop of 6.3 points in the previous wave due to the prevalent political situation.
After the drop in confidence due to Arab Spring, businesses appear to be more upbeat about the future.
Top issues for GCC executives include finding ways to educate and create jobs for the large number of young people entering the workforce and the continued threat of outside macro-economic shocks, Oliver Wyman/IBOPE Zogby said. Many executives felt that government efforts to create jobs for young nationals were more effective than those undertaken by the private sector, the survey shows.