Business confidence falls in Middle East: survey

DUBAI: Business confidence in the Middle East continues to fall as global economy is facing a period of volatility and major readjustments in the second quarter of 2015, according to a new study.

The slight optimism was due to a temporary reprieve in oil prices during the spring, but was a short-lived flame of hope for Organisation of the Petroleum Exporting Countries ( OPEC) members, which was quickly extinguished by the prospect of Iran re-entering the market within a year.

The Global Economic Conditions Survey (GECS) was organised by ACCA (the Association of Chartered Certified Accountants and IMA (the Institute of Management Accountants).

According to the survey, the global economy is facing a period of volatility and major readjustments.

More than any other region, firms in the Middle East began looking for opportunities in new markets in the last three months.

About 43 per cent of them took this approach, while over half of firms (53 per cent) sought ways of reducing costs during this difficult period, said respondents to the survey.

Some economies had a more difficult quarter than others. Saudi Arabia, which has yet to achieve significant diversification away from oil, was drawn into Yemen's internal conflict during the second quarter.

Qatar on the other hand has continued to boom, owing to large reserves of natural gas rather than oil, as well as ongoing investments ahead of the 2022 FIFA World Cup.

While Qatar is expected to record strong growth of 7.1 per cent this year, the IMF revised its overall forecast for the region down by a percentage point in its April 2015 World Economic Outlook.

The second quarter of 2015 saw an abortive rise in oil prices, several expected and unexpected rate cuts by central banks, a rebound in Western consumer sentiment and a stock market crash in China. These events led to business confidence levelling off in the second quarter of 2015 following six months of improvement, according to GECS.

The slowing in confidence can be traced to the world's largest economies: many businesses in the US were affected by severe winter storms, port disruptions and a strong dollar, while those in China faced a cooling economy in the first quarter and over-heating stock markets in the second.

Of these factors, China's economic slowdown and accompanying shift from investment to consumption-driven growth will have the greatest long-term impact on global trade patterns, hitting the world's major commodity exporters particularly hard.