Inflation, oil prices hit Gulf business confidence

CONFIDENCE DROP: Business confidence levels across the Gulf have continued to fall due to inflation, record oil prices and staffing problems. (Getty Images)

Business confidence levels across the Gulf continued to fall in the second quarter, as inflation, high oil prices and staffing problems dampened sentiment, the HSBC Gulf Business Confidence Index has revealed.

The survey, released on Sunday, found that while the general mood of Gulf business people remained buoyant, levels of business confidence had maintained their downward trend of the past 18 months.

Overall, the Business Confidence Index dipped to a mark of 94 from the benchmark 100 set in February 2007 when HSBC started the index. The index dropped from 96.8 in the first quarter of this year.

Individually, the most confident country in the Gulf was Qatar, with a score of 109.1, the highest in the region.

The least confident were Kuwait and Oman, with scores of 91.8 and 92 respectively. The sharpest drops were recorded in the UAE (from 96.7 to 94.7), Bahrain (from 96.2 to 93.7) and Saudi Arabia (from 95.8 to 93.3).

Tim Reid, head of global banking for HSBC in the Middle East, said inflation pressure concerns, the rocketing price of oil, and employee issues were cited as the three main drivers in the dip in confidence levels.

Only one in five survey respondents believed high oil prices were positive for their business, while over 50 percent felt the cost of property was a negative factor. Almost 45 percent believed a revaluation or de-pegging from the US dollar would have a positive impact on their business.

Despite the overall drop in confidence, 62 percent of those surveyed expected to see an increase in revenue this year, 52 percent expected to increase their workforce this year and 50 percent expected to increase profit this year.

Speculation on a revaluation of the local currency has also diminished, with only 28 percent now expecting a change in currency policy this year, down from 59 percent at the end of 2007.

The index surveyed 1,469 respondents from all six GCC countries. The index is based on expectations, business and political situation and the labour market.

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