Confidence rises in the Gulf

Business confidence rose across almost all Gulf countries in the first quarter of 2010, according to the latest HSBC Gulf Business Confidence Index. Only Bahraini business people saw a slight dip in confidence.

Compared to Q1 2009, the overall Business Confidence Index has risen by more than 20 points, indicating that the region’s business people are far more positive about their prospects than a year ago. Specifically, the last calendar year has seen a marked trend upwards of business people expecting growth in both revenue and profit.

Saudi Arabia continues to be the most optimistic in the GCC, leading the index at 96.3 points. Bahrain is the only country to show a decline over the last two quarters: from 86.5 in September last year, to 86.2 at year end, and 82.6 at April this year.

However, while confidence is clearly up on 2009, the index remains below the buoyant levels of 2007 and early 2008.

The UAE has the lowest business confidence in the region. Business confidence in the Emirates recorded a lower score than any other country in Q1 2009, but has recovered more gradually than other countries. The Q1 2010 Index stands at 76.6, up from 57.9 year-on-year.

Tim Reid, HSBC co-head of global banking for the MENA region, said, “Confidence does look to be up across the entire region. In 2009, we saw a profound dip in the Gulf economy with a clear impact on business confidence. However, what we’re seeing is real signs of improvement across the region. It remains to be seen if this is sustainable, but the increase in people expecting profits to rise and companies staffing up would suggest that the future is more positive.”

Other highlights from the survey included the following:

•  The outlook for cross-border trade, both intra-regional and international, has improved
•  A small but positive movement in expectations of hiring: 39 per cent expect to take on more staff compared to 37 per cent in Q4 2009
•  More than one in four answered “don’t know” when asked about their investment budget in 2010 – an indication of the lingering uncertainty in the overall business environment
•  Growth is expected to be driven by increased customer numbers (41 per cent) compared to revenue from existing customers of (22 per cent). The HSBC GCC Business Confidence Survey, compiled by YouGov Siraj, appears quarterly and tracks business sentiment in all six countries of the GCC.