Gulf business confidence declined in the first quarter of 2009, though with a semblance of stability, the latest HSBC survey said on Wednesday. The HSBC Gulf Business Confidence Index for the first quarter of 2009 has shown no recovery from the precipitous fall seen at the end of 2008. The overall index has moved from 70.3 in the final quarter of 2008 to 69.7 in the first quarter of 2009, a continuing downward trend, but far less than the 22-point fall seen in the fourth quarter of last year. Business people are in no doubt as to the cause of their lack of confidence: an overwhelming 42 percent cite “the economy generally” as the greatest challenge to their business this year. As to the duration of the slowdown, 28 percent believe things will not turn around for a year, while 20 percent feel it will be two years before circumstances improve, and a further 20 percent believe it will take longer than two years for the economy to recover. In a new departure, the survey has measured responses by sector, with some sharp differences in outlook and responses to the slowdown. When asked about investment budgets in 2009, half of businesses in the automotive and retail sectors said it would shrink; while in the consumer goods, industrials and banking sectors over half foresee growth in investments. The same opinion was indicated when asked about growth or maintenance of margins, with 36 percent and 40 percent of the Construction and Retail sectors respectively predicting margin erosion in the next quarter. The same two sectors are gloomiest about meeting their financial targets this year. “Overall, the results do not come as a surprise,” said Keith Bradley, head of Commercial Banking for HSBC Middle East. “The region is as much affected by the global economic slowdown as anywhere else in the world, and the survey confirms that business people became aware of this with a shock in Q4 2008, and that the global economy continues to impact their business in 2009.” The survey further showed a surprisingly high percentage - at least one in four - responded “Don't Know” when asked to predict their profits, turnover, and investment budgets in 2009, indicating the depth of uncertainty that exists among businesses It was also noted that consumer goods industry plans to invest more in 2009 than any other sector, with 35 percent predicting growth in investment, compared to just 14 percent of retailers. “The results of the first quarter validate the evidence we have from our customers,” said Tim Reid, co-head of Global Banking at HSBC. “Their businesses have rapidly and dramatically slowed down, and they are adjusting their forecasts, plans and outlooks accordingly. I think it also shows that there is a new sense of realism and a determination to get through these hard times, from private and public sector, and across the board from small companies to multinationals.” The survey revealed that Kuwait has shown an increase in confidence levels in the first quarter of 2009. __
