Business confidence in the Gulf fell sharply in the fourth quarter of 2008, from a rating of 92 in the third quarter to 70.3 in the fourth.
But the quarterly HSBC Gulf Business Confidence Survey has also revealed sharp intra-regional differences in business sentiment.
While sentiment in Qatar and Saudi has shown a more gradual decline, business outlook in the UAE has shown the steepest fall, to 62.2. "Perhaps we should not be surprised that we have seen such a steep fall in outlook, since confidence has been sky high for the past five years while the region has enjoyed a booming economy," said Keith Bradley, Head of HSBC Commercial Banking for the Middle East.
"We have witnessed the steepest falls in Dubai, but it is Dubai that has succeeded in becoming the service centre for the Gulf, and it is service-led economies that are most vulnerable to a slow-down," he said.
The fourth quarter survey plumbs new depths in sentiment:
- Only 31 per cent expect to see growth in turnover (compared to 57 per cent in Q3)
- Only 10 per cent predict profits to grow by more than 15 per cent (19 per cent in Q3)
- Twelve per cent of business plan to shrink their investment budget this year, compared to only four per cent three months ago.
"The change in sentiment has been steep and rapid," said Declan Hegarty, Co-Head of Global Banking at HSBC. "Our clients are telling us that while they predict a marked slow-down in activity in 2009, they also remain confident that business and trade in the region will continue, albeit at a reduced level from recent years. This is a slowdown, not a halt.
While we are under no illusions about the seriousness of this indicator, HSBC is also committed to helping its customers through tough times, as it has done in the past."
In another blow to confidence, the majority (59 per cent) of people see the crisis lasting for longer than a year, with 16 per cent predicting more than two years of difficult times to come.