Business confidence soars

Times News Service
Wednesday, March 25, 2009 9:10:16 PM Oman Time

MUSCAT — Business confidence in the Arab Gulf Cooperation Council (AGCC) appears to have shown no recovery for the first quarter of 2009 from the precipitous fall seen at the end of 2008, but does appear to have stabilised, HSBC said in a survey released yesterday.

The HSBC Gulf Business Confidence Index, which measures business confidence in the region, has moved from 70.3 in the final quarter of 2008 to 69.7 in the first quarter of 2009, a continuing downward trend, but far less than the 22 point fall seen in fourth quarter last year.

However, the confidence index in the Sultanate of Oman moved up to 99.3 while Kuwait’s confidence index rose to 99, leaving Saudi Arabia and UAE, Bahrain and Qatar as laggards.

An overwhelming 42 per cent cited “the economy generally” as the greatest challenge to their business this year, the survey said. As to the duration of the slowdown, 28 per cent believed things will not turn around for a year, while 20 per cent felt it would be two years before circumstances improve, and a further 20 per cent believed it would take longer than two years for the economy to recover.

In a new departure, the survey has measured responses by sector, with some sharp differences in outlook and responses to the slowdown.

When asked about investment budgets in 2009, half of businesses in the automotive and retail sectors said it would shrink; while in the consumer goods, industrials and banking sectors over half foresee growth in investments.

It is the same story when asked about growth or maintenance of margins, with 36 per cent and 40 per cent of the construction and retail sectors, respectively, predicting margin erosion in the next quarter. The same two sectors are gloomiest about meeting their financial targets this year. “Overall, the results do not come as a surprise,” said Keith Bradley, head of Commercial Banking for HSBC Middle East.

“The region is as much affected by the global economic slowdown as anywhere else in the world, and the survey confirms that business people became aware of this with a shock in fourth quarter of 2008, and that the global economy continues to impact their business in 2009.”

“The results of the first quarter validate the evidence we have from our customers,” said Tim Reid, co-head of Global Banking at HSBC.

“Their businesses have rapidly and dramatically slowed down, and they are adjusting their forecasts, plans and outlooks accordingly.

“I think it also shows that there is a new sense of realism and a determination to get through these hard times, from private and public sector, and across the board from small companies to multi-nationals.”