Sunaina Rana / Emirates Business
Economic confidence among CEOs in the MENA region has hit a three-year low in the final quarter of 2015, according to a new survey, which attributes the trend to oil price plunge and political, social unrests in many of the nations.
The YPO Global Pulse Confidence Index for the MENA declined for the fifth consecutive quarter, falling nearly one point to 56.4, below the global confidence level of 58.0. The figures in the UAE fell 7.2 points to 50.3, the lowest score in the six-year history of the index.
The fall in the confidence was noticed among the key economies within the MENA region. GCC countries like Saudi Arabia continued its warning slide, sinking to 14.7 points to 39.4, following a 17.9-point drop from the previous quarter. The drop was also seen in the other countries including Egypt, Kazakhstan, Pakistan and Syria. However, Lebanon reported an increase in confidence, climbing 4.7 points to 53.6.
Chaker Saab, Chairman of the Board for Tinol Paints International, and Regional Communications Officer for YPO Middle East/North Africa told Emirates Business, “The decline of economic confidence among CEOs in MENA is evident in the results of the Global Pulse Index for the fourth consecutive quarter. As the survey shows, the decline was felt most in the GCC countries driven by significantly lower optimism in Saudi Arabia.”
“This is the first time Saudi Arabia’s index dropped below 50, the lowest level since the YPO survey began in 2009. Though the UAE has more diversified economic base than Saudi Arabia, the overall Global Pulse Index has decreased by 7.2 points to 50.3 in Q4 2015, its lowest level since 2009,” he added.
According to YPO report, more than a third (36%) of YPO CEOs expected business and economic conditions to get worse in the first half of 2016, with 35% expecting little or no change in the economic environment. Only 29% predicted an improvement.
“The macroeconomic environment in the MENA region is very challenging due to historically low commodity prices and subsequent austerity measures introduced in numerous oil producing nations. Efforts to diversify various economies away from over-dependence on oil will present interesting opportunities in the medium term,” said Rafi Demirjian, Chairman of the Board for Demirjian Global and Regional Chair for YPO Middle East/North Africa.
“Low oil prices and civil unrest in the region continue to impact confidence levels amongst business leaders,” said Hatem El-Nazer, managing partner at HK Ventures and a member of the YPO Qatar and Cairo chapters. “Without a rise in oil prices or at least some control on production, it’s likely that most oil exporting countries in the region will face a particularly tough 2016. While not all countries in the region are oil exporters, CEOs across the region will remain somewhat risk-averse in the current climate, particularly in the GCC where governments are under pressure to cut spending and increase their non-oil revenue.”
The adverse effects of falling oil prices can be quite evidently be witnessed in the GCC among the major oil exporting countries of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE. The confidence among GCC countries has fallen up to 25.0 points since oil prices began to decline in October 2014 from 70.0 to 45.0. The drop in oil prices forces governments to curtail spending, raise taxes or borrow.