Week in review: Gulf business confidence down but not out

With the downturn now in full swing - and now clearly going to be far deeper than some initially predicted - HSBC has said that within the GCC, business confidence has at least stabilised in the first quarter of 2009, although it shows no signs yet of reaching previous highs.

The government said that UAE fixed price Gross Domestic Product (GDP) grew 7.4% to Dhs535.6bn in 2008, compared to a growth rate of 5.2% to Dhs498.7bn in 2007. Current price GDP totalled about Dhs929.4bn in 2008 compared to Dhs729.7bn in 2007. Preliminary reports, it said, show that there was a trade balance surplus of Dhs184.1bn last year.

It believes that the economy is well place to come out of the downturn and expects to see 'signs of revival in financial markets during the second half of this year'.

The Ministry of Economy has said that in the meantime, infrastructure projects will continue apace and that the 'government will continue to maintain the increase in the level of its expenditure on projects, despite the decrease in oil revenues'.

It is often said that so much of coming out of a downturn is down to consumer and business confidence. So perhaps the fact that HSBC's business confidence index shows that the decline was arrested during the first few months of 2009 is a positive sign. Although confidence was down very slightly, at least there was no repeat of the 22 point drop in the previous quarter.

The reason for the lack of confidence - and an indication of the work the government still needs to do - was overwhelmingly 'the economy', cited by 42% of those questioned.

Business people are less confident than regional governments as to when there will be a turnaround. Some 28% believe things will not turn around for a year, while 20% feel it will be two years before circumstances improve, and a further 20% believe it will take longer than two years for the economy to recover.

For any company or government, the fact that 40% of business people in the region think it will take two or more years for the Gulf economies to begin to recover is a gloomy prospect.

With so many people losing their jobs - and no let up yet in redundancies expected - it is easy to think there is little hiring going on at the moment, but as we found this week, some sectors in the UAE have show resilience.

The employment experts we spoke to said some sectors were still looking for people, but that the UAE has quickly become an employers' market. As ever with opinion and statistics though, sometimes they contradict each other.

So while the above mentioned Gulf business confidence index found that the construction and retail sectors are predicting margin erosion, they were cited by recruitment consultants as two of the three sectors still hiring in the UAE. The other is IT. But, warned recruitment consultants, expect getting that job to be far harder than it was a few months ago, when fewer CVs were landing on the desks of HR departments.

For other business people, the downturn is seen as an opportunity to gain additional education. With fewer than one in five new start-ups surviving long term in the Gulf, some entrepreneurs are using this period to business schools to brush up on their skills, offering MBAs that, for instance, help them improve their management skills.

'A business school can help someone to evaluate and test their ideas and can temper and direct their enthusiasm so that they plan properly both for opportunities and challenges,' said Professor Jordi Vinaixa from the international business school ESADE.

With confidence down but not currently dropping and some sectors still hiring, it gives at least hope to those who have lost their jobs over recent months that they can still find employment.

But, with so many now in the seekers' pool chasing a decreasing number of available positions, many in the Gulf will be left hoping that the UAE government, and not business people questioned in the confidence index, have got the economic outlook right.