Gulf business morale continues to dip

The Business Confidence Index has dipped to 94 from the benchmark 100 set in February 2007. Inflation, oil prices and staffing issues are cited as the main drivers of the dip in confidence levels.

The second quarter Index of 2008 surveyed 1,469 respondents from all six GCC countries, with the majority coming from Saudi Arabia and the UAE.

In spite of the concerns, however, the region's business community remains confident about strong growth prospects, according to the index.

While 62 per cent surveyed expect to see an increase in revenue this year, 52 per cent expect to increase their workforce and 50 per cent expect to increase profits this year Speculation on a revaluation of the local currency has also diminished, with only 28 per cent now expecting a change in currency policy this year, down from 59 per cent at the end of 2007.

"In a region with a predicted economic growth of seven or eight per cent, we are not surprised to see that confidence is high among business people," said Tim Reid, head of global banking for HSBC in the Middle East.

"Once again, the index provides an accurate mirror of what our customers are telling us: that while there are challenges, business remains strong, and optimism among the business community is high."

The most confident country in the Gulf is Qatar, with an Index of 109.1, far and away the highest in the region. The least confident are Kuwait and Oman, with scores of 91.8 and 92 respectively.

Keith Bradley, head of commercial banking for HSBC in the Middle East, said: "While the large acquisitions and investments by the region's governments and sovereign wealth funds tend to grab the headlines, a more significant indicator for us is the confidence and expectations of growth in the region's small and medium enterprise sector.

"In terms of turnover, staffing levels, and growth prospects, the region's businesses are in expansion mode."

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