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HSBC Sees a Rebound in Gulf Business Confidence

The HSBC Gulf Business Confidence Index rose to 81.4 in the third quarter from 75.9 in this year’s second quarter – the best result in the index for the past 12 months.

By “almost all measures,” businesses in the six GCC member countries are more optimistic about their performances for the full year 2009, the bank said on Wednesday.

Saudi Arabia earned the highest score of 91.5, up from 86.8 in the second quarter and 82.5 in the first quarter. Although the UAE had the lowest score in the group, at 72.2, business sentiment in this country has improved so far this year at a faster rate than anywhere else.

The UAE scored 65.9 in the second quarter and 57.9 in the first. The UAE earned a score of 100 for the first quarter of 2007, when HSBC began conducting its regional survey of business confidence.

“I think we’re seeing a very positive trend in these latest statistics,” Simon Vaughan Johnson, Regional Head of Commercial Banking for HSBC Middle East, told Khaleej Times.

Companies in the UAE may have suffered the steepest drop in confidence since the onset of the recession, but sentiment here is rebounding strongly, he said. “And I think you have to balance the two.”

Among the other nations in the survey, Oman scored 87.1; Bahrain, 86.5; Qatar, 84.8; and Kuwait, 83.1.

The price of crude oil is the single biggest factor in regional confidence. This helps to explain why business confidence in the UAE, with the most diversified and least energy-dependent economy of the Gulf Arab countries, now lags that of its 
neighbours, Johnson said.

The UAE’s substantial property, trade and financial services industries have helped to integrate it thoroughly into the global economy, he said. But this also means that the global recession has hit the UAE harder than, say, Saudi Arabia, which derives a greater share of its national wealth from oil.

The survey found that 34 per cent of the respondents predict growth in their revenues in the next three months, up from 29 per cent in the second quarter. Similarly, 30 per cent foresee an increase in profits, with only 13 per cent predicting that profits will fall in the rest of 2009.

Of the respondents, 26 per cent predict higher investment levels, compared to 22 per cent in the second quarter, and 16 per cent foresee their workforce shrinking in the next year, compared to 25 per cent who reported job losses in the past 12 months.

Overall, 54 percent of the executives and managers said that they believe their business will improve, up from 42 per cent in the first quarter.

“I’m not particularly surprised by the trend…,” Johnson said. “Our customers are telling us very much the same story. There is a level of concern. I don’t think we’re out of the woods yet... (But) they all feel that in the UAE, we’re looking to come out of this (downturn) in the next nine to 12 months.”

The Business Confidence Index, compiled by YouGov Siraj, included responses from 1,641 business executives and managers in the region. The questionnaires were completed on September 27-30. —bruce@khaleejtimes.com