Business Confidence Marked Deceleration in Middle East
According to Global Economic Conditions Survey (GECS) jointly conducted by ACCA and IMA finance professionals, ‘Business Confidence’ plunges in the Middle East for the second quarter of 2015. However, the declining quotient remained slow as compared to the first quarter of the year.
During spring, the provisional reprieve in oil prices brought a little optimism for OPEC members. But, Iran’s prospective return to the market within a year has snubbed their hope.
This survey report also showed that Middle East was on the crest of searching good opportunities in the new markets. Moreover, in last three months, 43% firms in Middle East have adopted this approach while the rest of 53% reduced the expense costs to survive through this rough span.
Some economies faced more difficult period than others in last quarter.
Saudi Arabia had extremely tough economic period because of its intrusion in Yemen’s conflict in the second quarter. KSA has yet to gain momentous diversification away from oil.
While Qatar kept on booming mainly because of the large reserves of natural gas instead of oil. Qatar’s investments in the 2022 FIFA World Cup has added great value to its economy and is expected to record the resilient growth of 7.1 percent this year.
According to GECS, the global economy is passing through the period of volatility and major reformations. 2015, in second quarter, has observed several rate cuts by central banks, china’s stock market crash, an abortive rise in oil prices, and also a rebound in the Western consumer sentiment.
Survey says that these big events are major cause behind the declined business confidence in last three months. This deceleration in confidence can be traced to the world’s biggest economies. For instance, a lot of US-based businesses faced the distress because of severe winter storms and the port disruptions plus a strong dollar. On the other hand, China marked the over-heating stock markets in the previous quarter.
Economic slow-down in china accompanied with swing from the investment to consumption driven growth is anticipated to have the greatest and exhaustive impact on international trade patterns and might get hard on the world’s major commodity exporters predominantly.
About 35% of survey respondents expected to see a decrease in government spending over the next 5 years while nearly 50% assumed the increase. GECS also deciphered that many firms reduced their workforce upon facing the uncertainty. In preceding quarter, 41% of businesses have either ceased the new inductions or cut off the staff that’s nearly twice the number which have increased staff levels over the same period.
The Biggest Global Economic Concern:
Rise in costs appeared as a major global issue, for which, 46% of respondents exhibited worry about the unsolicited impact. Whereas, the foreign exchange happenings were cited as a big problem by more than one-third of the giant businesses having cross-border supply chains.
There was, however, a noteworthy regional variation found existing in between the confidence in the economic vista and the readiness to shoulder the new staff. In North America, the number of firms creating new opportunities for job seekers was quite greater than others expressing good confidence in the economy.
In Africa and South Asia, on the contrary, relatively high business confidence had yet to translate into all-fresh investments in people. This might be the reflection of uncertainty for the business sustainability and growth in regions facing various inner challenges and outer vulnerabilities.
‘Since the global financial crisis of 2008, China has been viewed as the engine of the world’s economy. 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’, said Faye Chua (Head of Business Insights with ACCA)
He also said that ‘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.
‘The outcome of OPEC’s next meeting on whether to curb oil supply; the extent to which Indian Prime Minister Modi manages to implement his reform programme for India and the ongoing negotiations between Greece and the rest of the euro zone, will be issues which could have a huge impact on business confidence in the second half of 2015.’