Business confidence in Kuwait positive despite global financial crisis

The D&B Business Optimism Index (BOI) is a measure of business confidence in an economy. Released quarterly, it is based on a business sentiment survey that is designed to capture business expectations.

It is one of the most effective ways to track how the business community perceives the business environment, and where they see their business moving.

The D&B Business Optimism Index (BOI) for Q1 2009 was conducted in November 2008 - a time when sentiments are low amid virulent crisis in the global financial markets, and growing concerns over the declining crude oil prices. However, the BOI survey indicates that Kuwaiti business units have fairly positive business expectations for the first quarter of 2009. The study indicates that 58% of the business units surveyed expect an increase in Net profits during the next quarter and 55% foresee a rise in Volume of Sales.

Rajesh Mirchandani, CEO of D&B South Asia Middle East, comments:

"The fact that Kuwait is still expected to post a healthy growth rate in 2009 indicates the resilience of the Kuwait economy and this is reflected in the BOI survey The businesses are however treading cautiously with regards to any new hiring or investment plans given the mixed signals in the global and domestic market demand."

The Business Optimism Index reveals some early yet definite signs of easing inflationary pressures in the economy. Almost 50% of the survey respondents expect no change in the Level of Selling prices in the next quarter as compared to the last one and 23% expect a decline.

The full effect of the global financial crisis is yet to unfold, and the BOI Survey shows that Kuwaiti business units' display mixed reactions with regards to likely impact on their business. 47% of non-hydrocarbon business units expect a negative effect on their business, while 45% do not foresee any significant impact.

Abdulaziz N. Al-Marzooq, General Manager of MIC, comments:

"We believe the Kuwaiti economy remains sound and will bounce back to register a decent growth despite of turbulence in the stock market. Given the fact that Kuwait has achieved a huge surplus in past few years and a recent u-turn in declining oil prices. Moreover, the Central Bank of Kuwait is actively developing programs aimed at stanching the financial market malaise. From guaranteeing customer and interbank deposits loans to provide new capital injection for financing institutions, it has been working around the clock to restore confidence and nurse the financial sector back to health."

"In current financial turmoil, the Kuwaiti stocks are trading at attractive levels and we firmly believe that blue chip stocks with sound business policies are bound to create investors interest in coming time. Further, the combination of a recent drop in commodity prices, interest rates cuts, liquidity injections and government's initiatives should be viewed as a first step towards stability in financial sector,"Al-Marzooq added.

Despite the uncertainties about the global economy, business units in Kuwait are planning to continue their investment plans. 59% of the respondents surveyed expect an increase in investments for business expansion, and another 20% plan to invest in technology infrastructure.

As the latest addition to D&B's global series of Business Optimism Indexes, the Business Optimism Index on Kuwait, done in association with Muthanna Investment Company, will be issued on a quarterly basis and will be one of the most effective ways to keep track of where businesses think the Kuwait economy is moving. The next Business Optimism Index on Kuwait will be released in April 2009.