Confidence returning to Gulf region, but UAE is most pessimistic

Business people in the GCC are 20 per cent more confident about the future than they were a year ago.

Business people are regaining confidence across the Gulf but the Emirates remain the most pessimistic in the region, a new survey shows. The latest HSBC Gulf Business Confidence Index reveals that Saudi professionals are most upbeat about their prospects. It comes after the IMF said Middle East countries were recovering at good speed, with the UAE economy expected to grow twice as fast this year, registering GDP growth of about 1.3 per cent.

The HSBC survey of 1,323 respondents showed GCC business people were 20 per cent more confident about the future than one year ago and sentiment was up 5 per cent from the final quarter of last year. The index asked professionals about their expectations for future profits, growth, hiring, trade and other factors. "Confidence does look to be up across the entire region. What we are seeing is real signs of improvement across the region," said Tim Reid, the HSBC co-head of global banking for the Middle East.

"It remains to be seen if this is sustainable but the increase in people expecting profits to rise and companies' staffing [to go] up would suggest that the future is more positive." Professionals in the UAE continue to have the lowest hopes for future growth and profit - the index stands at 76.6 compared with Saudi Arabia at 96.3 points and Bahrain at 82.6. But confidence in the UAE has gained the most, climbing almost 20 points from a low of 57.7 a year ago. The bank set its index base at 100 when it launched the measure in 2007.

Saudi Arabia was again the most optimistic member of the GCC, while business people in Bahrain have lost confidence about their economy for the second quarter in a row. The upbeat forecast for the Saudi economy follows similar findings from Banque Saudi Fransi. The bank's Q2 Business Index Survey found many respondents expected oil prices to remain high at between $75 and $80 a barrel. Higher oil prices tend to boost confidence as the bulk of the government's income derives from crude.

In its World Economic Report released on Tuesday, the IMF upgraded its forecast for global economic growth this year and upheld its forecast for the MENA countries to grow at 4.5 per cent. Last year, the UAE's economy shrank by 0.7 per cent. The IMF said the pace of recovery in advanced economies and the impact of Dubai World's debt restructuring proposals were key risks clouding the economic outlook for the region.

The study also revealed an improved outlook for cross-border trade. Two in five respondents expect to take on staff and to increase customer numbers, according to YouGov Siraj, which conducted the survey. [e-mail]