In stark contrast to a severe downturn affecting most of the world economies, the Saudi economy, though “relatively affected” by the fallout, remains buoyant. The Kingdom's business confidence stays stable and will sustain the positive momentum albeit in a subdued manner, indicated the first edition of the Saudi Arabia Business Optimism Index for the first quarter of 2009 prepared by Dun & Bradstreet South Asia Middle East Ltd (D&B) - the world's premier financial data and business information provider - in association with the National Commercial Bank (NCB) - Saudi Arabia's prime financial institution. In its launch at the NCB headquarters here on Monday, Rajesh Mirchandani, chief executive officer of Dun & Bradstreet, said that despite bleak global economic backdrop, Saudi business optimism remains high, even if dented. Most businesses were upbeat in their net profits over time as inflationary pressures lessen and the demand outlook for the first quarter is expected to be moderate. Mirchandani explained that the D&B Business Optimism Index (BOI) is a measure of business confidence in an economy. Released quarterly, it is based on a business sentiment survey that is designed to capture business expectations. It is one of the most effective ways to track how the business community perceives the business environment and where they see their business moving. He noted, however, that since the Business Optimism Survey for the first quarter of 2009 was conducted in November 2008 amid a scenario of an economic slowdown in most of the developed countries, some changes might have occurred at present that might alter in a way the observations. Nonetheless, the BOI survey shows that while business optimism in Saudi Arabia is depressed for the period covered, it is still “positive.” The domestic demand levels are expected to remain robust which will help in minimizing the impact of external shocks to a great extent. The study indicates that 59 percent of all the respondents surveyed in the non-hydrocarbon sector expect an increase in volume of sales during next quarter and 61 percent foresee a rise in net profits. In the hydrocarbon sector as well, 55 percent of the business units are expecting an increase in the profits. He pointed out that based on the 500 “carefully studied and selected” entrepreneurs and senior executives across business units surveyed, they seem to be divided in their perception of the global financial crisis. Fifty one percent of companies anticipate some impact of the financial crisis on their business while 41 percent feel that their companies will not face the brunt of the financial upheaval. The services sector, consisting of financial, insurance, real estate and other business services firms, is most optimistic about managing the fallout of the crisis. “The BOI also indicates some concerns among the business units regarding prices of raw material, availability of skilled labor, competition etc. as 59 percent of the business units cite rising prices of raw materials as their biggest business concern.” Availability of skilled labor supply also emerges as a significant business concern, the survey added. While inflation remains a key business concern, the results of BOI survey indicate that there are signs of easing inflationary pressure. Commenting on these findings Dr. Said Al-Shaikh, chief economist at NCB, said “KSA has been witnessing significant inflation in the past few years due to abundant liquidity arising out of oil export revenues, strong domestic demand, rising commodity and food prices, and a weak US dollar. The global economic slowdown has caused food and commodity prices to retreat, and the BOI survey indicates that almost a third of businesses in the non-hydrocarbon sector expect their selling prices to fall, and 35 percent do not expect any change in the level of their selling prices.” “Expectations indicate that we will see a very gradual easing of inflationary pressure in the next quarter.” On the overall findings of the survey, Mirchandani further said even though the global economic slowdown will impact Saudi Arabia's business community, the effect will not be as vast as in the Western economies. “The results of the BOI survey reflect the resilience of the Saudi economy in the face of global financial crisis. The BOI survey shows that backed by high sales and profit expectations, 41 percent of companies polled have said that expenditure on business expansion will be their leading investment outlay during the next quarter. An additional 46 percent of business units also plan to invest in technology and machinery, signaling that the Saudi business community has got strength to withstand the short term turbulence in the global economy,” he said. __
