While a vast majority of chief executives worldwide are bracing for a global recession, top bosses of some of the largest businesses in the UAE anticipate growth and expect an increase in their earnings, according to a new study.
Only 24 per cent of the chief executives in the Arab world’s second largest economy expect an economic downturn, as opposed to 86 per cent of executives worldwide, who agree or strongly agree on the possibility of a recession in the next 12 months, consultancy KPMG said in its latest CEO Outlook report on Friday.
Sixty per cent of UAE executives surveyed expect their companies' earnings to increase by 2.5 per cent to 4.5 per cent annually over the next three years. That is more than twice the number of top executives worldwide, or 28 per cent of those polled globally, who expect to see a similar growth in earnings.
KPMG, which polled 1,325 corporate bosses worldwide across 11 markets for the survey, said chief executives around the world are getting ready to implement their resiliency strategies over the next six months, while chief executives “in the UAE already had their strategies in place”.
“Local chief executives are forging ahead with bold visions,” said Nader Haffar, chairman of KPMG Middle East and South Asia and chief executive of KPMG Lower Gulf.
“They are cementing strategies to combat inflation pressures and defend against cyberattacks, and are embracing sustainability reporting.”
The optimism stems from the UAE government’s efforts to prepare for potential headwinds and boosting the country’s economic resilience as it emerged from the pandemic-driven slowdown.
The country also has advantages that allow it to better withstand global economic shocks, including its strategic location, strong financial reserves and large asset base sovereign wealth funds, according to the survey.
The UAE economy, which made a strong rebound from the pandemic-driven slowdown in 2021, has picked up pace this year. It is set to expand by 5.4 per cent in 2022, according to the UAE Central Bank.
Emirates NBD, Dubai’s biggest lender, expects the economy to expand 7 per cent in 2022, setting up the country for its fastest annual expansion since 2011, when output grew by 6.9 per cent.
Abu Dhabi Commercial Bank, meanwhile, projects growth of 6.2 per cent, driven by oil and non-oil sectors of the economy.
Business activity in the UAE’s non-oil private sector economy continued to improve in October, with S&P Global purchasing managers’ index rising to 56.6, as new business and output climbed along with a rise in demand and employment.
A reading above the neutral level of 50 indicates growth, while one below it points to a contraction.
Eighty-eight per cent of UAE corporate bosses are confident about economic growth prospects for the country, while 96 per cent are bullish about the growth of their industry, a rise from 88 per cent recorded in the 2021 survey.
They are, however, less confident when it comes to growth prospects for the global economy. About 56 per cent are confident in global growth over the next three years, compared with 71 per cent of chief executives worldwide.
When compared to 2021’s 44 per cent, it's still clear that "optimism is moving in a positive direction for the UAE", KPMG said.
This year’s survey shows that the UAE market "is well positioned to withstand geopolitical instability, inflation and a looming global recession", Mr Haffar told The National.
"With strong financial reserves, diversification of supply chains, and the vigorous adoption of digital and cybersecurity strategies, we’re seeing the impact of the UAE leadership’s foresight to build a resilient economy in the face of global economic downturn.”
UAE policymakers have prepared for a potential slowdown by diversifying supply chains and focusing on boosting productivity by expanding the country's industrial base.
Global chief executives plan to do the same, but only 32 per cent of those surveyed had actually diversified enough already, compared with 68 per cent in the UAE.
“That puts local leaders ahead of their global counterparts by at least six months,” the report said.
Businesses are now turning to on-shoring more aspects of their supply chains. About 32 per cent of corporate leaders in the UAE said they planned to source domestically to enhance production resiliency over the next three years.
“With 75 per cent of companies worldwide experiencing supply chain disruption during the Covid-19 pandemic, using local suppliers offers insurance against new Covid-19 variants and geopolitical instability,” KPMG said.
About 96 per cent of UAE chief executives reported having an aggressive digital strategy in place — much higher than the worldwide rate of 72 per cent.
The Emirates' corporate leaders are getting increasingly ambitious about technological transformation. More than 80 per cent of those surveyed in the UAE — higher than last year’s 64 per cent — said driving digital transformation at a rapid pace was critical to competing for talent and customers.
Chief executives around the world also viewed geopolitical uncertainty as a reason to worry about cyber attacks on their companies. In the UAE, 92 per cent of respondents said their organisations were well prepared for a cyber attack, compared to just 56 per cent of global corporate bosses.
Sixty per cent of business leaders in the UAE said that hybrid and remote work policies have had a positive effect on their organisation’s hiring over the past two years.
These policies also boosted employee morale in a majority of cases (56 per cent) and positively affected collaboration and innovation (68 per cent).
However, only 36 per cent of chief executives now expect to “continue hybrid work for employees whose roles were traditionally based in-office”.
Sixty per cent of UAE leaders expected them to be back on site, similar to 65 per cent of corporate leaders worldwide, the study said.