Regional political turmoil fails to dampen business confidence

Outlook is buoyant with a 4% increase in hiring expectations

17 June 2011

Dubai: After a drop in the regional business confidence index in the first quarter of this year due to the regional political turmoil, the benchmark is picking up steadily, a survey by HSBC showed yesterday.

"This month — for the first time — we have also attempted to track the impact of the regional unrest on business confidence. The results are surprising. While 60 per cent of respondents believe that the current political unrest will negatively impact their business, this has not impacted their access to credit — with 51 per cent of respondents stating that their access to credit is the same as last year, and 40 per cent claiming that the situation has improved," said Alain Renaud, co-Head of Global Banking, HSBC Mena (Middle East and North Africa).

The HSBC GCC Business Confidence Index began in February 2007. Saudi Arabia topped the gain in the index with a 2.8 per cent gain. While the UAE continued its steady improvement in business confidence with a 1.8 per cent gain in the index, Kuwait and Qatar showed modest gains.

Improved optimism

The political situation in the region appears to have slightly dented the expectations on business turnover for most businesses. However, on a positive note, no change assumed for business profits and investment budgets. On profitability and employment, the outlook is buoyant with a 4 per cent increment in hiring expectation reported for the next quarter.

On investments, the survey showed improved optimism with a two per cent gain in positive sentiment with regard to investment budgets, indicating that businesses are willing to take risks.

HSBC's business confidence index for the second quarter follows the recent release of Venture Capital report in the Mena region by Mena Private Equity Association which said optimism and business confidence is returning to the region.

Private equity and venture capital professionals said that the recent political turmoil has not had any negative impact on business and industry, on the contrary, the new found political freedom in countries such as Egypt and Tunisia is likely to give a big boost to entrepreneurship.

"The region's youth are becoming more dynamic, creative and entrepreneurial and that they are exhibiting this new attitude in many ways including starting new businesses. The outcome will be a growing number of opportunities to invest," said Emad Gandour, Managing Partner of Cedar Bridge Partners.

The HSBC survey also showed that optimism on business performance is gaining ground with about three in five still continue to be of the opinion that organisation's performance will be 'better' in the coming quarter.

"Businesses have stayed steady in overall performance over the last few quarters, and, more positively, companies are telling us that they are actually planning to hire," said HSBC's Renaud.

Besides competition, the political situation and economic weakness emerge as the top three challenges that businesses face. Lack of investment and staffing issues also follow closely. Six in ten consider the political situation in the country they operate in to be stable with the exception of Bahrain where more than 50 per cent think the political situation is unstable.

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