Corporate executives from the Middle East are growing increasingly optimistic about the growth prospects of their businesses, in spite of the unrest that some countries still face within the region.
Some 67 per cent of chief financial officers surveyed in the Middle East and North Africa (Mena) region say they are decidedly optimistic about the financial prospects of their company now compared to the prior six months. That is up 21 points from when the question was first posed at the end of 2009 and marks an 18-month high, says a study from the consultancy Deloitte & Touche.
More than 80 per cent of the surveyed chief financial officers, who cover industries such as energy, manufacturing, finance and hospitality, also believe operating cash flow from their company will rise over the next year. That is substantially higher than the 49 per cent who felt this way during the third quarter of last year.
"What we're seeing here is really a collective sigh of relief that things seem to be back on track," says Dr Jarmo Kotilaine, the chief economist of NCB, the biggest bank in Saudi Arabia. "It looks like the optimism is quite firm."
Business executives were less optimistic earlier in the year, when major market indexes in the region suffered sharp falls in the wake of the waves of unrest that had washed through many countries. But as stability has returned to some nations and oil prices have risen sharply, executive confidence has been growing.
The announcement of large government spending programmes has also helped to shore up optimism. In March, a US$10 billion (Dh36.73bn) GCC support package was offered to Bahrain, whose government said last week it would spend 6.2 billion Bahraini dinars (Dh60.41bn) on rebuilding its economy over the next two years. Saudi Arabia's economy, meanwhile, is expected to grow 6.5 per cent this year, in part, because of a rebound in the private sector supported by increased government spending, according to data released by the IMF.
"The general expectation is the liquidity conditions will be better and there will be more government-sponsored economic activity," says Dr Kotilaine. "This will trickle down to other economies."
By some indications, consumer confidence is also on the rise. Last week, The Nielsen Company released the results of a study showing consumer confidence in the Mena region surged 17 points on its index, to a record of 106 - higher than the global level of confidence, which is now 92.
Yet executives are still uncertain regarding the macro environment in which their businesses operate; 89 per cent of chief financial officers surveyed by Deloitte say their companies face a higher-than-normal level of uncertainty in the external environment. And while many expect strong operating performance over the next year, with key indicators such as revenue, operating margins and cash flow all expected to show an increase, they do not expect hiring to pick up at nearly the same pace, according to Deloitte.
There are a number of factors that could have significant implications, warns Dr Kotilaine.
Both the short-term outlook of the US economy, as well as the European debt crisis, could get the regional markets and business executives nervous.
Also, he says, some are growing increasingly worried about inflation pressures.
Deloitte, too, warns that the market outlook among executives indicates inflation on the horizon.
