Not much has changed after the world caught in a whirlwind of economic turbulence last year but business confidence is picking up surely albeit slowly, as evidenced by the growing optimism among those who steer the private sector.
While CEOs around the world feel they have plenty to worry about in the year ahead, confidence in their own growth prospects and their outlook for their respective economies are back on the rise, reveals a recent survey by accountancy firm PwC.
This is particularly true for Middle East CEOs, as conversations with them reveal very positive projections for their businesses, says the London-headquartered firm.
PwC’s Annual Global CEO Survey of 1,300 chief executives from 79 countries finds that 38 per cent of CEOs worldwide are very confident about their company’s growth prospects in the next 12 months. This compares with 35 per cent in 2016.
Furthermore, 29 per cent of those at the helm of companies believe that global economic growth will pick up in 2017. Last year it was 27 per cent.
The survey, in which more than 50 CEOs in the Middle East responded, however, says that top executives in the region, though confident, are playing a cautious hand when it comes to growth strategies, avoiding more speculative new ventures and refocusing on core capabilities and securing growth with tried and tested partners and exit strategies.
“Despite uncertain times, Middle East businesses are as ambitious as ever; they have proved resilient in times of change and our survey shows that though treading with caution, they are certainly confident about the direction their businesses will take in the years to come,” says Hani Ashkar, Senior Partner, PwC Middle East.
In fact, 38 per cent of Middle East respondents are very confident about their company’s prospects over the next 12 months (2016: 34 per cent) and as many as 60 per cent have the same degree of confidence over the next three years – by far the highest of any region, the survey finds.
Meanwhile, 88 per cent of CEOs in the region are confident about their company’s prospects for revenue growth over the next 12 months.
The improving confidence has a positive impact on job creation as 56 per cent of the region’s respondents. The regional figure compares with an average of 52 per cent CEOs globally who expect to increase their headcount over the next year.
“Compared to 12 months ago, a level of business confidence has returned. Although oil prices remain depressed there is more relative certainty in the economic outlook. This is encouraging businesses to again refocus on the growth agenda alongside continued attention to cost and efficiency,” says Stephen Anderson, Clients & Markets Leader at PwC Middle East.
Global economic growth fears
The region’s CEOs may be positive about their own prospects, but they are slightly more pessimistic than their global peers when it comes to global economic growth.
Only 26 per cent believe we will see global growth in the next year, the same as the figures from North America and lower than the global average of 29 per cent.
At 20 per cent, more CEOs in the region expect an actual decline in global growth than in any other region.
“That said, our own interactions with business leaders in the region suggest that many believe the second half of 2016 was the low point for the global economy and we will now start to see a more sustained recovery,” says Anderson.
Private sector expansion
Dubai’s largest lender Emirates NBD’s recent surveys have showed that business conditions in non-oil private sector in the region’s major economies were continuing to improve.
In Saudi Arabia, business expansion in February was at the quickest rate since August 2015 while there was a sharp and accelerated increase in inflows of new work underpinning a robust expansion of output in the UAE.
Strong demand conditions and a favourable economic environment encouraged companies in the emirates to scale up purchasing activity and hire additional workers over the month, the Emirates NBD UAE Purchasing Managers’ Index (PMI) showed.
The kingdom’s PMI reading was at 57.0, well above the 50-point mark that separates growth from contraction.
On the other hand, business activity in Egypt shrank for the 17th consecutive month in February although the pace of decline slowed from a month before, the PMI for the country showed.