Saudi firms plan expansion Q2 despite crisis - survey

Around half of Saudi companies expect to invest in business expansion during the second quarter of 2009, despite the global crisis , it was reported on Wednesday.

The “Business Optimism Survey for Q2 2009” launched at the National Commercial Bank (NCB) headquarters in Jeddah on Tuesday showed that 46 percent of responders intended to carry on business expansion plans for Q2 2009 - although they were more subdued about the economy than they were at the start of the year.

More than a quarter of the non-hydrocarbon companies said they expected to hire new employees, even though 38 percent of them were not expecting economic recovery to begin until 2010, according to Saudi daily Saudi Gazette.

Hydrocarbon companies were the most bullish in terms of the net profits outlook, 53 percent said they expected an increase in profits and 35 percent hoped to hire new employees during the second quarter.

However, the construction sector headed the BOI survey in terms of sales, profitability, new orders and hiring plans, with business expansion plans continuing to lead investment outlay.

The survey also revealed that the prices of goods and services were expected to fall further this quarter - supported by the fact that the inflation in the Saudi Arabia fell to 7.9 percent in January compared with nine percent in December 2008.

Rajesh Mirchandani, CEO of Dun & Bradstreet South Asia Middle East Ltd, who carried out the survey with NCB, said Saudi Arabia was "leading the pack” in the region because its economy was more robust.

“This shows the resilient nature of Saudi Arabia’s business community in light of global financial meltdown,” he said.

“Saudi Arabia is expected to weather the financial storm without taking a huge battering due to the country’s strong economic fundamentals, huge reserves accumulated during the past few years, prudent use of these reserves and limited exposure of its banks to the real estate market and to US subprimes collateralized debt obligations,” Mirchandani added.

However, the survey showed that business optimism was more subdued for Q2 2009, compared with Q1 2009, because of the global financial recession.

Demand was expected to weaken this quarter, with the survey showing that the optimism index for volume of sales had dropped from 38 last quarter to 12 for Q2.

Just 40 percent of all businesses in the non-hydrocarbon sector anticipated an increase in sales volume for the second quarter of 2009, compared with 59 percent in teh first quarter.

While the proportion of businesses expecting an increase in profits fell from 60 percent to 40 percent, with just 43 percent predicting they would get new orders this quarter, down from 57 percent in Q1.

Meanwhile, 35 percent of the oil and gas sector businesses expected their selling prices to decrease, with 58 percent citing a drop in oil prices as their top business concern.

The “Business Optimism Survey for Q2 2009” was prepared by Dun & Bradstreet South Asia Middle East Ltd in collaboration with NCB

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