Saudi business mood improves

Business confidence in Saudi Arabia looked better in the first quarter of 2013, buoyed by strong oil prices and a record budget approved by the world’s oil superpower for the year, according to a survey conducted by the country’s largest bank.

The business optimism index (BOI), released quarterly by National Commercial Bank (NCB), showed that Saudi Arabia’s hydrocarbon sector optimism has improved to 33 from 25 as all parameters have gained from the previous quarter’s level.

The hiring outlook of the sector has also improved while the BOI for the Number of Employees parameter has gained 7 points to 47 in Q1 2013.

The composite BOI for the non-hydrocarbon sector also rose to 55 from 47 in Q4 2012 and all six parameters have recorded an improvement, NCB said.

Profitability expectations have also improved from the previous quarter with the BOI for the Net Profits parameter growing to 55 in Q1 2013 from 53 in the fourth quarter of 2012. The BOI for Number of Employees has improved by 5 points to 53 from 48 in Q4 2012 while the BOI for Level of Stock gained 17 points to reach 33 in Q1 2013.

Four out of the five business sectors in the non-hydrocarbon sector have registered higher optimism levels while one has revealed mild retraction.

The construction sector holds the most optimistic outlook among the various sectors surveyed for the sixth quarter in a row in Q1 201 while the transport & communications sector holds the least optimistic outlook for Q1 2013.

According to the survey, 40% of the respondents in the non-hydrocarbon sector have highlighted that they do not expect any negative factors to influence their business operations in Q1 2013 compared to 25% in Q4 2012.

About 22% of the respondents are concerned about availability of skilled labor while 10% are concerned about inflationary factors.

It showed nine% of the sector respondents have cited the availability of finance as a concerning factor while six% anticipate low demand for products / services to be a key challenge for their business.

In terms of investment in business expansion in Q1 2013, about 57% of the non-hydrocarbon companies have said that they would invest in business expansion in Q1 2013 while 21% do not plan any investments and 22% are unsure.

Sector-wise, Manufacturing and Trade & Hospitality sectors are most optimistic on their investment plans, according to the survey.

In the hydrocarbon segment, 48% of the business units feel that their businesses are insulated from any negative factors in Q1 2013.

About 23% are concerned about availability of skilled labor and 13% have cited government regulations as a key challenge.

The inflationary factor is a leading concern for another 5% of the sector respondents. In terms of investment in business expansion in Q1 2013, 53% of the sector respondents plan investments in business expansion compared to 45% in Q4 2012.

 “The BOI of 1Q 2013 is indicating that more Saudi companies expect business conditions to improve further in the near term, as all the parameters reflected increases, yet with varying degrees across the different non-hydrocarbon sectors,” NCB Senior Vice President and Group Chief Economist Said Al Shaikh said.

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