- Business confidence in Middle East improves for second consecutive quarter, but remains low amid slumping growth rates
- 44% of businesses report worsening conditions
- UAE in stronger position as budget surplus relaxes austerity measures
- Improving confidence in North America and China driving global uplift in sentiment
The latest Global Economic Conditions Survey (GECS) from ACCA (the Association of Chartered Certified Accountants) and IMA® (Institute of Management Accountants) shows that global business confidence in the Middle East has improved for the second consecutive quarter, despite economic growth in the region being at a thirty-year low.
The Q3 2016 GECS survey of more than 1,512 finance professionals and more than 150 Chief Financial Officers around the world, found that global confidence is at a 12 month high, boosted by increased prospects of government spending and recoveries in China and North America.
Lindsay Degouve de Nuncques, head of ACCA Middle East, says that business confidence in the Middle East has improved as firms and governments adjust to falling oil prices,
“The confidence survey highlights that falling state spending and business investment since the fall in oil prices continues to offer a downbeat outlook for many firms in the Middle East, although many are feeling optimistic that they are over the worst
Despite the improvements we have seen, ultimately regional business confidence is the lowest anywhere outside Africa or the Caribbean, with 44% reporting worsening conditions”
Lindsay Degouve de Nuncques does think, however, that UAE is in a stronger position than many other regional economies,
‘The UAE is starting to reap some of the benefits after some tight fiscal measures following the oil price slump. The budget is now in surplus, which means that businesses are feeling more confident that investment may no longer continue to fall and may even start to improve soon.
Ultimately the strength of the UAE is a diversified economy where the robust performance of the logistics and tourism sectors are able to compensate the oil price fluctuations.
Lindsay Degouve de Nuncques notes that while the biggest concern for the Middle East remains oil prices rather than political shocks such as the UK’s Brexit vote, the US elections in November could have a more global impact,
‘Despite fears that Brexit could unsettle the global markets, so far this has not been the case. Brexit is definitely a European, rather than global concern: the UK represents only 4% of global trade GDP. Nearly 60% of global respondents said that they had not been affected by the vote.
Yet, given the uncertainty surrounding the US elections in November, where protectionist sentiments have been unusually pronounced, the outcome and response of the new President will be significant for the future prospects of global free trade’
Despite improvements in confidence, the world is yet to see it translate into a meaningful boost to hiring and investment. Lindsay Degouve de Nuncques noted that only 19% of firms said they are considering hiring new staff, and only 14% were looking at opportunities to invest in new technology. In every region, there were more businesses planning to cut staff than those planning to hire more.
GECS is the largest regular economic survey of accountants around the world. Its main indices are good predictors of GDP growth in themed countries and its daily trend deviations correlate well with the VIX or ‘fear’ index, which measures expected stock price volatility. Fieldwork for the Q3 2016 GECS took place between September 2-19, and attracted 1,512 responses from ACCA and IMA members around the world, including more than 150 CFOs.