RIYADH – The Business Optimism Index for Saudi Arabia for the first quarter of 2013 prepared by the National Commercial Bank, in association with Dun and Bradstreet South Asia Middle East Ltd (D&B), portrayed a resilient business outlook despite a feeble global economic growth. Sentiments among Saudi Arabia's business community have improved in the first quarter of 2013. The BOI survey for Q1 2013 reveals higher optimism levels compared to those recorded in the previous quarter, said Prashant Kumar, Associate Director, of Dun and Bradstreet South Asia Middle East Ltd. Availability of skilled labor is cited as a leading concern by most of the business units in the hydrocarbon as well as the non-hydrocarbon sector. With an improvement in business sentiments, most businesses in both hydrocarbon as well as the non-hydrocarbon segments plan investment in business expansion in Q1 2013. The latest D&B BOI survey unveiled in Riyadh at a press conference Tuesday showed that the Saudi Arabia's hydrocarbon sector optimism has improved to 33 from 25 as all parameters have gained from the previous quarter's level. The BOI for Level of Selling Prices has gained 8 points to 13 in Q1 2013 compared to 5 in Q4 2012. The BOI for the Net Profits stands at 58, which is 10 points above the score in Q4 2012. The hiring outlook of the sector has also improved; the BOI for the Number of Employees parameter has gained 7 points to 47 in Q1 2013. The composite BOI for the non-hydrocarbon sector stands at 55 compared to 47 in Q4 2012 and all six parameters have recorded an improvement. The BOI for the Volume of Sales parameter has registered a value of 65 compared to 56 in Q4 2012, while the BOI for the New Orders parameter is recorded at 66 compared to 57 in Q4. The BOI for Level of Selling Prices stands at 34 in Q1 2013, compared to 19 in Q4 2012. Profitability expectations have also improved from the previous quarter. The BOI for the Net Profits parameter is recorded at 55 in Q1 2013, up from 53 in the fourth quarter of 2012. The BOI for Number of Employees has improved by 5 points to 53 from 48 in Q4 2012. The BOI for Level of Stock stands at 33 in Q1 2013, 17 points up from the previous quarter. Four out of the five business sectors in the non-hydrocarbon sector have registered higher optimism levels while one has revealed mild retraction. The construction sector holds the most optimistic outlook among the various sectors surveyed for the sixth quarter in a row in Q1 2013. The transport & communications sector holds the least optimistic outlook for Q1 2013. Commenting on the findings of the survey, Dr. Said Al-Shaikh, Senior Vice President and Group Chief Economist of the National Commercial Bank, said “the BOI of 1Q 2013 is indicating that more Saudi companies expect business conditions to improve further in the near term, as all the parameters reflected increases, yet with varying degrees across the different non-hydrocarbon sectors. Respondents to the survey in the non-hydrocarbon sectors expect volume of sales to be strengthening, with a widespread expectation of rising selling prices. Compared to the previous quarter, there is lesser companies anticipating negative factors to affect their businesses in the 1Q 2013. While the survey results broadly reflect the satisfaction of the Saudi business community with kingdom's recently announced expansionary 2013's budget that continued to emphasize spending on social and physical infrastructure, the biggest concern of businesses is the availability of skilled labor, followed by inflationary factors. Moreover, the improved business outlook was feeding more enthusiasm, as the results indicated that companies remained steady for investment in business expansion.” 40 percent of the respondents in the non-hydrocarbon sector have highlighted that they do not expect any negative factors to influence their business operations in Q1 2013 compared to 25 percent in Q4 2012. 22 percent of the respondents are concerned about availability of skilled labor while 10 percent are concerned about inflationary factors. 9 percent of the sector respondents have cited the availability of finance as a concerning factor. 6 percent of the respondents anticipate low demand for products / services to be a key challenge for their business. In terms of investment in business expansion in Q1 2013, 57 percent of the non-hydrocarbon companies have said that they would invest in business expansion in Q1 2013, 21 percent do not plan any investments and 22 percent are unsure. Sector-wise, Manufacturing and Trade & Hospitality sectors are most optimistic on their investment plans. In the hydrocarbon segment, 48 percent of the business units feel that their businesses are insulated from any negative factors in Q1 2013. 23 percent are concerned about availability of skilled labor and 13 percent have cited government regulations as a key challenge. Inflationary factor is a leading concern for another 5 percent of the sector respondents. In terms of investment in business expansion in Q1 2013, 53 percent of the sector respondents plan investments in business expansion compared to 45 percent in Q4 2012. – SG
