The Saudi business sector remains "resilient" and would continue to enjoy "stability" in the second quarter of this year, the National Commercial Bank (NCB) said Tuesday at the launch of its Business Optimism Index for Q2 2012, in association with Dun and Bradstreet South Asia Middle East Ltd. (D&B). The quarterly survey painted a rosy forecast for the Saudi business sector despite the prevailing geopolitical stalemate in the region and the eurozone debt crisis, among others. Dr. Said Al-Shaikh, Senior Vice President and Group Chief Economist of the NCB, said three factors explained the exceptional condition of Saudi Arabia that sustains its robust economy. First, he said the government's commitment to increase capital expenditure serves as a "buffer" to reduce the impact of the global economic weakness. Some SR270 billion worth of contracts were awarded by the government in 2011 both to the private and public sectors to further stimulate domestic growth, he noted. Second, comparing the local versus the international financial status, the Kingdom has been enjoying huge surpluses, indicating that the government has enough reserves to fund the growth-generating projects, he said. The country has SR2.3 trillion foreign assets to date, he added. Third, Al-Shaikh stressed the importance of "fading away" predisposition which reflects the attitude to lessen the impact of any negative events, where the initial "heightened fear" would eventually dissipate, discarding the pervading worries as the shock would eventually be absorbed. This situation has happened in the past and will be repeated again, he pointed out. "Saudi government, undeterred by the financial difficulties faced by advanced economies, continued to span its capital expenditure, and in turn stimulating economic growth. Geopolitical tensions in the region, which have dominated the sentiment in the oil market, also brought with it higher Saudi production and prices and higher government oil revenues, as reflected by the second quarter BOI of the hydrocarbon sector.” “With positive oil outlook and government commitment counterbalancing global economic uncertainty, the second quarter BOI of non-hydro carbon sector remained steady, showing only minor changes from previous quarter,” the survey noted. Confirming this, 33 percent of the respondent “do not anticipate any negative factor coming into play in the 2nd quarter 2012 compared to 31 percent in the first quarter 2012," Al-Shaikh said. The BOI survey revealed that Saudi Arabia's hydrocarbon sector optimism has improved in Q2 2012. The overall BOI composite score for the sector is 43. 3 points higher than the score in Q1 2012, due to higher BOI scores for all three parameters. With respect to the level of selling prices parameter, 53 percent of the respondents expect prices to rise further and 37 percent anticipate that prices will remain unchanged in Q2. Ten percent of the respondents anticipate a drop in prices in Q2 2012. Majority of respondents expect prices to increase as geo-political tensions with respect to Iran's nuclear program continue to dominate sentiment in the crude market. The BOI score for level of selling prices is at 43 in Q2 2012, compared to 40 in the previous quarter. Consequently, the net profits expectations of the industry players have also brightened in the current quarter, the BOI for which is recorded at 38, compared to 33 in the last quarter. The BOI for number of employees has increased to 47 in Q2 2012 from 45 in the first quarter of 2012, which again reflects the overall gain in expectations. The BOI survey also noted a steady composite index, as businesses and consumers remain assured by the government's commitment to support the economy despite a weak global environment. All six parameters show a sideways movement in their index values for Q2 2012, with marginal increases or decreases. The BOI for the volume of sales parameter has registered a value of 67 compared to 66 in Q1 2012, while the BOI for the new orders parameter is recorded at 65 compared to 67 in Q1. The BOI for level of selling prices stands at 24 in Q2 2012, compared to 27 in the last quarter. The inflation rate in Saudi Arabia was recorded at 5.4 percent in February 2012. There is expectation of a relative stability or a slight decline in the inflationary pressures in the coming period due to a decline in the world food prices, and relative stability in the domestic market. __
