Middle East chiefs less optimistic about growth this year

Survey by PwC was launched at the annual meeting of the World Economic Forum in Davos.

People gather inside the Congress centre during the first day of the 45th Annual Meeting of the World Economic Forum (WEF), in Davos. Jean-Christophe Bott / EPA

Davos // Fewer Middle East chief executives are optimistic about prospects for growth at their companies in the coming 12 months than they were last year, according to the annual survey of business leaders conducted by the international accounting firm PwC.

The percentage of chief executives from the region who said they were “very confident” of growth in their businesses fell to 44 per cent this time from 69 per cent last year, the study showed.

The survey – launched at the annual meeting of the World Economic Forum in Davos – also revealed that about 71 per cent of regional chief executives planned to implement a cost-reduction initiative over the next 12 months, but only 16 per cent planned to cut their workforce.

Middle East chief executives are also overwhelmingly concerned about the possibility of social instability in the region. About 80 per cent named this as a main concern.

The survey was conducted in the final quarter of last year as the big slide in the oil price was gaining momentum.

“The fall in the oil price is a factor for sure,” said Dennis Nally, PwC’s chairman. “It impacts CEOs’ thinking about their business, and can have a very negative impact on a company and a country, as we’ve seen in Russia. Chief executives believe this will be much more prevalent in 2015.”

Regional chief executives regard the United States and the UAE as the most important countries for growth this year Egypt was third.

On the global stage, fewer chief executives than last year think that global economic growth will improve over the next 12 months, with only 37 per cent expecting an increase in growth, down from 44 per cent last year. Significantly, 17 per cent believe global economic growth will decline, more than twice as many as last year.

Executives in Asia Pacific are the most optimistic, followed by the Middle East and North America. Chief executives in central and eastern Europe were the least optimistic.

On Tuesday, the IMF said it had lowered its forecast for global growth this year as the boost from lower oil prices was outweighed by weaker prospects for China and the euro zone.

“The world is facing significant challenges, economically, politically and socially,” said Mr Nally. Chief executives overall remain cautious in their near-term outlook for the worldwide economy, as well as for growth prospects for their own companies. While some mature markets like the US appear to be rebounding, others, such as the euro zone, continue to struggle.

“CEO confidence is down, notably in oil-producing nations around the world as a result of plummeting crude oil prices. Russian CEOs, for example, were the most confident in last year’s survey, but are the least confident this year. Confidence also slipped among CEOs in the Middle East, Venezuela and Nigeria.”

The IMF’s projections indicate that Russia is currently in recession and that its economy will shrink by 3 per cent this year, as sanctions, low oil prices and the dramatic fall of the rouble cut export income.

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