Middle East firms’ business confidence falls in Q2 2015

Business confidence among firms in the Middle East fell during the second quarter of 2015 but the rate of decline has slowed, a new survey by the Association of Chartered Certified Accountants and the Institute of Management Accountants showed.

The poll attributed the slowdown in the fall of business confidence to higher oil prices during the period.

As a result of unsteady business prospects, nearly 43 per cent of companies polled in the region said that they were looking for opportunities in other markets while 53 per cent said that they were reducing costs during this period.

The survey noted that certain regional economies like Saudi Arabia suffered due to lack of diversification from oil revenues while the conflict in Yemen also took a toll on business confidence. Meanwhile respondents said that Qatar was booming mainly driven by large natural gas reserves and the infrastructure work for World Cup 2022 projects.

The regional trend was also reflected globally as business confidence across the world fell in Q2 2015 after improving for the last six months.

An abortive rise in oil prices, several expected and unexpected rate cuts by central banks, a rebound in Western consumer sentiment and a stock market crash in China all contributed to the fall in business confidence, the survey added.

“Since the global financial crisis of 2008, China has been viewed as the engine of the world’s economy,” said ACCA’s head of business insights Faye Chua.

“Yet with more sturdy fundamentals re-emerging in the US and Western Europe, the role of Western consumers in driving demand is coming back to the fore.

“Looking ahead to the next quarter, overall confidence is set to rise in the wake of stronger economic reports coming out of the US and China. There are a critical number of factors affecting this. It is likely that the Federal Reserve will raise US interest rates before the quarter is out, which could intensify current currency trends though much of the impact would already have been priced in.”

Chua added that factors such as OPEC’s decision on oil output, reforms implemented by the Indian Prime Minister Narendra Modi and negotiations between Greece and other Eurozone countries are some of the factors that will impact business confidence in the second half of 2015.