Qatari business community cautiously optimistic for Q2 2013
Qatari business butterflies
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Almost half of respondents identified no negative factors hampering their business during the survey period, although the main challenge cited was difficulty in finding skilled labour, according to a press release.
Dun and Bradstreet South Asia Middle East Ltd in association with Qatar Financial Centre (QFC) Authority released this latest survey during a press conference hosted in partnership with the Qatari Businessmen Association.
Commenting on the findings of the latest survey Prashant Kumar, Associate Director, Dun and Bradstreet South Asia Middle East Ltd., said, "The government's policy of targeted infrastructure investment to encourage economic diversification and growth in non-hydrocarbon sectors has kept business confidence more or less steady. There has been only a slight decrease in the optimism levels of the non-hydrocarbon and hydrocarbon sectors of 5 points and 3 points respectively in Q2 2013. The Qatari business community is confident of withstanding the continuing consequences of the global economic crisis. In the hydrocarbon sector 48 per cent, and in the non-hydrocarbon sector 46 per cent, of respondents maintain that no negative factors will impact their business this quarter."
Yousuf Mohamed Al-Jaida, Chief Strategic Development Officer, QFC Authority, said, "Qatar's economy is robust and resilient, as this survey demonstrates. The Qatari business community's continued optimism is soundly based. The strong growth of the non-hydrocarbon sector shows that economic diversification is gathering momentum. A notable example is the rapid expansion of the financial sector, which the QFC has a mandate to help develop."
On behalf of Qatari Businessmen Association, H.E. Sheikh Mohamad bin Faisal bin Qassim al Thani, commented, "The Qatari business community is optimistic about our country's development, which has been and remains a remarkable growth story. We are committed to invest in wealth creation to help meet the goals of the Qatar National Vision 2030, under the wise guidance of His Highness Sheikh Hamad bin Khalifa Al-Thani, The Emir of the State of Qatar and His Highness Sheikh Tamim bin Hamad Al-Thani, The Heir Apparent, and play our part in diversifying the economy through entrepreneurship and expanding the private sector."
The BOI survey for Q2 2013 reveals that the overall Composite BOI score for the sector has reduced by 3 points to 12 in the current quarter compared to 15 in the previous quarter, mainly due to a sharp fall in the Net Profits parameter. The index value for Net Profits plunged to 5 in Q2 2013, a 15 point drop from the Q1 2013 value. The BOI score for the Level of Selling Prices parameter has reduced marginally by 2 points from the preceding quarter to a value of 10 this quarter. The only parameter to show an increase is the Number of Employees parameter which has moved to 23 in Q2 2013 compared to 15 in Q1 2013.
Non hydrocarbon Sector
The Composite BOI for the non-hydrocarbon sector fell 5 points from the previous quarter to 40 in Q2 2013, primarily because of a sharp drop in optimism about sales. The BOI for the Volume of Sales parameter has plummeted by 21 points to attain a value of 40 in the current quarter, as compared to 61 in the previous quarter. The New Orders parameter has held steady at 56, while the BOI for the Level of Selling Prices has inched up marginally to an index value of 16 in Q2 2013, as compared to the previous value of 13 points in Q1 2013. With a dampened sales outlook, the Net Profits parameter stands at 43 in Q2 2013, a decline of 6 points from the score of 49 attained in the preceding quarter. At 43, the Number Employees parameter has fallen by 4 points from the Q1 2013 figure.
Factors Impacting Qatari Business Optimism
Of the respondents in the non-hydrocarbon sector, 46 per cent do not anticipate any negative factors hampering business operations in Q2 2013. Twelve per cent of businesses cited fluctuating demand for products / services, while around 10 per cent of businesses expressed concerns about the lack of skilled labour. Around 7 per cent of the survey respondents indicated that competition is a key challenge, while a similar proportion highlighted constrained availability of finance as a major concern. Five per cent of non-hydrocarbon businesses envisage being affected by a delay in payments / receivables, whereas around 4 per cent have indicated that inflation could reduce their business margins in Q2 2013.
Of the non-hydrocarbon sector respondents, 44 per cent expressed intent to invest in business expansion in Q2 2013. Around 31 per cent have not drawn up any plans for expansion, while 25 per cent remain undecided. The trade and hospitality sector is the most optimistic among the sub-sectors in terms of business expansion plans in the current quarter.
Forty-eight per cent of respondents in the hydrocarbon sector have indicated that there are no negative factors that will hamper business operations in Q2 2013. Of these firms, 20 per cent have identified fluctuating demand for products and services as a challenge, while another 13 per cent of business respondents cite a lack of availability of skilled labour as a concern. Business regulations (issues in obtaining labour visas) were highlighted by 8 per cent of hydrocarbon businesses as the main hindrance to their operations. Delays in receiving payments or ageing of receivables were cited as a major concern by around 5 per cent of survey respondents. The availability of cheap finance, the impact of inflation and competitive pressures each concerned about 2 per cent of the business respondents.
Uncertainty in the Global Economy likely to Subdue Oil Prices in the Short Term
Subdued economic growth in the current year has led the world's top oil forecasters to cut their 2013 oil demand forecasts. The IEA reduced its forecasts for global oil demand in 2013 for a third consecutive month in April, predicting the weakest consumption in Europe in almost three decades. European demand is expected to slump by 330,000 bpd. Worldwide oil consumption remains supported by emerging economies such as China, where demand will increase this year by 380,000 bpd, or 3.9 per cent, to 10 million bpd a day.
OPEC joined has the EIA in lowering its 2013 oil growth forecast, citing weaker-than-expected demand in developed economies, particularly Europe and Japan, and uncertainties about the outlook for the US economy.
A combination of soaring US oil output, sluggish global demand, a visible slowdown of China's recovery and an early resolution of the Iranian crisis could cumulatively force down oil prices.
Qatar's 20-year investment programme, whose strategy is to commercialize its substantial natural resources, culminated in 2011. The State has placed a moratorium on the development of new hydrocarbon projects until 2015 to give itself time to assess its production performance and carry out a comprehensive study of its North Field. These factors are likely to restrain the sector's growth to around 0.4 per cent in 2013 (IMF forecast). Qatar's mining and quarrying sector (which includes hydrocarbon production) grew at 1.7 per cent in 2012, according to the Qatar Statistics Authority. The real GDP of this sector in Q4 2012 has been estimated at QAR 36.76 billion. It has grown by a meagre 0.1 per cent on year-on-year (Q4 2011 estimate was QAR 36.71 billion). When compared to Q3 2012, the estimate shows a decline of 2.1 per cent, primarily due to the fall in crude oil extraction.
During the first half of Q1 2013 restored optimism about the world economy supported crude oil prices. But towards the end of February, a loss of confidence in the global recovery seems to have hampered the market's upward momentum. The average monthly OPEC basket declined from $106.44 per barrel in March to $101.05 per barrel in April. Oil prices are likely to remain flat or fall during the short term as the world economic situation remains weak.
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