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The study, conducted by corporate finance consultancy Full Circle Investments (FCI) and based on interviews with high-level executives from around 150 private sector companies across the Gulf, found that 90% of respondents expected GCC economies to grow exponentially in the next 12 months. Around 67% of respondents said they were confident of growth in the GCC economy over the coming 12 months, compared to a global average of 40%, the firm added.
"There is a great degree of confidence even in a period when most business leaders in other regions are nervous," says Laya Medawar, a partner at FCI and one of the authors of the report. "It shows a very strong faith in the fundamentals of the region, which is based on the fact that even if the oil price comes down substantially, governments have the money and the inclination and the need to undertake substantial spending programmes. By definition that's going lead to a whole bunch of opportunities across all sectors."
Government spending rises
The six GCC countries, which between them control more than 40% of the world's recoverable oil deposits, have boosted public expenditure by up to 60% since the 2008 global financial crisis began. Much of that increase has come since early 2011: they have pledged to spend in excess of $150bn in response to the violence which ripped across the Middle East and North Africa (MENA) region last year.
This level of investment is likely to lead to increased opportunities for private sector companies; as a consequence firms are shifting their focus from bottom-line management to top-line growth accordingly. And although 73% of respondents said they expected to complete an M&A transaction within the next 12 months, 81% of those questioned said that they were relying primarily on organic growth over the next year.
"A fair degree of decoupling has occurred since the financial crisis began in 2008, whereby sentiment among business leaders in the GCC is uncorrelated to what is going on elsewhere, primarily in Western markets," says Ghassan Medawar, founding partner at FCI. "There is an imminent prospect of growth [in the Gulf], and you see that in the way businesses are positioning themselves to hire within the next 12 months. There are some exceptions within that, financial services being one, but business leaders are definitely seeing opportunities to capture the benefits of top-down growth.
"The dependency this time around is far less on third party capital, and much more through [companies'] own means," he continues. "They are going to their own shareholders and more than two thirds of respondents see the opportunity for growth financed through internal cash or shareholders, rather than third-party banks. There is still leverage, we're not saying that they've stopped going to the banks altogether, but their primary source has been through internal means."
Saudi Arabia seen as top market for growth
Perhaps unsurprisingly, Saudi Arabia was identified by respondents as having the greatest growth potential, based on confidence in the government's commitment to significant social and infrastructure spending in the wake of last year's Arab Spring unrest.
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