Low oil prices, regional tensions dent business confidence in the UAE

Low oil prices and geopolitical tensions in the region have impacted business confidence among UAE finance professionals, a new survey has found.

According to a poll carried out by the Association of Chartered Certified Accountants and the Institute of Management Accountants in the first quarter this year, finance professionals had a negative perception of doing business in the region.

The survey noted that there was a sharp drop in recruitment quarter-on-quarter, indicating a troubled economic climate.

Staff cuts were the greatest in the Middle East, with 50 per cent of respondents experiencing them. This was also accompanied by a steep fall in the number of companies investing in staff development.

The UAE also saw a fall in the number of new orders and around 38 per cent of respondents reported lower availability of capital, choking the supply of loans to businesses.

“Clearly the uncertainty in the region, coupled with lower oil prices, has had a negative impact on confidence in the finance profession,” said Lindsay Degouve de Nuncques, head of ACCA Middle East.

“There are strengthening signs of recovery elsewhere, which may help in the long run. But the shorter-term indicators have deteriorated for the region over the last quarter.”

Concerns of a cutback in state spending due to the oil price plunge have grown, but Gulf governments have vowed to keep spending, drawing from their fiscal reserves amassed from years of high oil revenues.

Despite this, bankers and businessmen are noticing an imperceptible tightening in finances, especially in the UAE.

“Some belt-tightening in a low oil price environment is normal, and it seems the days of aggressive shopping overseas are done for now,” a source familiar with Abu Dhabi’s thinking was quoted as saying to Reuters.

“The focus is on local developmental projects – oil and gas, industry, tourism, infrastructure, to create jobs and boost the economy,” he said, declining to be named because he was not authorised to speak publicly to media.

Saudi Arabia too has been feeling the heat from oil price volatility. The kingdom’s’s foreign reserves were down by almost 6 per cent in the first four months of this year compared to the end of 2014, a recent report from Jadwa Investment showed.

In order to ease the pressure on its reserves, the country will soon begin to issue bonds, an IMF official said.