Saudi Arabian businesses are less confident about prospects for the third quarter than in the previous period because of faster inflation and tighter credit markets, an index of corporate sentiment shows.
Prices are a concern to 61 per cent of businesses surveyed, compared with 50 per cent in the first quarter.
Thirty-eight per cent expect bank lending to be positive in the third quarter, compared with 71 per cent in the second, Saudi British Bank said in an e-mailed statement yesterday.
Inflation has accelerated above 10 per cent in five of the six Gulf Cooperation Council states, including the UAE and Qatar, as oil-fuelled economic growth created shortages of real estate and services, while the weaker U.S. dollar and higher global food prices made imports more expensive.
"Inflation is one of the key factors denting business confidence," John Sfakianakis, chief economist at Saudi British, said in the report.
"Although the various subsidies announced will have an impact in terms of cushioning the effects, prices will continue their upward trend." Saudi inflation slowed to 10.4 per cent in May from a record 10.5 per cent in April, its second month in double digits.
The Saudi British Bank Business Confidence Index, which surveys 537 businesses, fell 5.2 per cent to 100.02 from 105.4 in the second quarter, the bank said. Business confidence remains high, with 89 per cent of respondents expecting stronger growth in the coming two quarters.
Speculation that the riyal will be revalued against the dollar remained low, at 17 per cent, according to the survey.
A call last week by a member of Saudi Arabia's Shoura Council, an unelected advisory body, to revalue the riyal is unlikely to succeed, said analysts from Eurasia Group, Royal Bank of Scotland Group and Barclays.