Business confidence decreased in the last quarter of 2012 across all countries in the GCC, with the largest drop in Saudi Arabia (-6.86
points) and Bahrain (-6.72 points), according to the YouGov and McGill Consulting Group Business Confidence Index.
The index measures optimism across various factors of economic health that contribute to the growth and sustainability of businesses. It is part of a series of decision-making tools created by YouGov and McGill Consulting Group to help leaders make better strategic decisions.
The results of the latest survey indicate that overall business confidence remained the most stable in the UAE, despite witnessing a decline of 0.60 points.
“Although we are experiencing a slight decline in optimism in the next 12 months, it’s nothing alarming as of yet,” said Nader Sabry, Managing Partner at McGill Consulting Group. “This is an early warning sign to several executives in the region to start taking more innovative measures both on an operational and product development level,” he added.
The Business Confidence Index indicates that most firms in the GCC remain cautiously optimistic regarding commercial agility, with more than half citing the optimisation of operations as a key source of growth in the next 12 months.
Respondents are most optimistic about the financial services sector in Q4, which jumped eight places since last quarter. The increase was underpinned by growing confidence in the availability of investments, which improved by 7.6 per cent since the previous quarter (Q3).
Firms in the UAE remained timid in nature regarding debt financing, preferring to use internal resources before seeking external sources of financing.
According to the index, UAE firms demonstrated a higher level of confidence in the availability of internal financing sources than Saudi Arabia, particularly in equity from internal sources (45 vs. 33 per cent). Conversely, respondents in Saudi Arabia revealed more confidence in equity from institutional finance than those in UAE (24 vs. 18 per cent, respectively).
Political instability remained high on the list of concerns of firms operating within the GCC. While roughly one-quarter of respondents did not show direct concern, nearly one-third showed indirect concerns originating from geopolitical unrest.
“Despite instability in the global economy, GCC markets have remained largely resilient, translating to comparatively optimistic growth forecasts for the next 12 months,” stated Sundip Chahal, CEO of YouGov MENA.
“However, significant risks persist and the intensification of geopolitical tensions in the region could have a substantial impact.
Mitigating such risks will require foresight and flexibility,” Chahal added.