GCC business confidence remains high despite risks

DUBAI — A comprehensive survey of business confidence levels across the GCC has found that business people in all sectors in all countries hold a positive outlook on their prospects for the next quarter. The survey also reveals that there are strong risks to their business in a booming economy.

By A Staff Reporter

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Published: Tue 27 Mar 2007, 9:06 AM

Last updated: Sat 4 Apr 2015, 10:54 PM

The HSBC Gulf Business Confidence Index, compiled with polling organisation YouGov Siraj, surveyed almost a thousand business people in the six countries of the GCC in February.

Among the key findings are: 53 per cent are planning to increase investment in their business in 2007; 72 per cent expect revenues to increase in the next quarter; almost one in four (24 per cent) expect corporate profits to rise by more than 15 per cent; 66 per cent expect turnover to rise in 2007; 54 per cent cite an expanding market as being the prime driver of business growth. Only 5 per cent cited merger and acquisition activity

But the Gulf's business people are acutely aware of the risks that they may face in the future. Constraints on human capital, increasing competition and high inflation are all quoted as potential threats to commercial success.

Forty eight per cent of businesses see inflation as a threat, although there are some interesting regional diversions to this figure, with half the number of Saudi businesses (28 per cent) worrying about inflation as in the UAE (55 per cent). Staffing is also perceived to be a challenge, with over one in three (35 per cent) having a negative outlook on keeping up with staffing requirements in their business.

The rising cost of real estate is cited as having a negative business impact by 47 per cent of respondents, while more than one in three (36 per cent) see a downside in the rising cost of raw materials to their business.

"The state of mind of the region's business community is best described as positive, but not unrealistic," explained Keith Bradley, regional head of commercial banking for HSBC Middle East. "The region's businesses have a broadly upbeat outlook, but one that is acutely aware of downside risks to business, whether that is inflation, raw material pricing, staffing or political risk. What this survey says to me is that the GCC business community is a mature sector, operating in a globalised economy, albeit in one of the world's fastest-growing regions."

Antoine Cahuzac, CEO of HSBC Global Banking in the Middle East, added: "Taken together, the GCC comprises the fourth largest emerging market in the world. With the rapid growth of the private sector in the region, the outlook of business people becomes a critical measure of the ongoing health of the regional economy. The Index for the first quarter of 2007 shows that we are in a very favourable climate, but that business people are not resting on their laurels."

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