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Wed 9 Jan 2008 01:08 PM

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Businesses cry out for GCC currency revaluation

Half of regional businesses say dropping dollar peg would have positive impact.

One in two businesses people believe that currency revaluation would have a “positive impact” on firms across the Gulf, a quarterly survey by HSBC bank has revealed.

On the much-debated issue of regional currencies, the financial institution’s Gulf Business Confidence Index for the fourth quarter 2007 revealed that 47% of business people said that a revaluation would have a “positive impact” on their business, while an even larger 59% expect GCC governments in their country to revalue their currency against the increasingly weak US dollar.

HSBC’s fourth survey also showed that business people are now far less confident than they were at the beginning of 2007 with Gulf-wide levels falling from 100 points to 97.8 throughout the course of the year.

The bank also found that ‘absolute confidence’ levels remain very high, with 66% expecting revenue to grow in the next three months, 52% expecting to increase profit margins, and 65% predicting turnover to rise between 5 and 15%. In addition, 57% expect to grow their workforce.

However, the Index also revealed a slowdown in this sentiment with only 52% expecting to maintain their profit margins in the next three months (down from 58% in Q1) and 66% expecting to grow revenue in the next three months, compared with 71% at the start of the year

The impact of inflation has become a major headache for business, the bank discovered, with 57% saying it has a negative impact on their operations, compared to 36% in the first quarter.

Qatar was the most confident state in the Gulf in the fourth quarter with an Index score of 112. The emirate is the only Gulf state to have shown an increase in the Index over 12 months with all the others falling or remaining static. Bahrain was the least confident, scoring 92

“Looking at the year as a whole, confidence levels among Gulf business have shown a consistent level, which are higher than in many parts of the world,” said Antoine Cahuzac, CEO of HSBC Global Banking in the Middle East. “Gulf business is in growth mode, and remains positive in its outlook.

“The findings of the fourth Business Confidence Index reflect the increasing challenges and opportunities of doing business in the region. Elements such as inflation, human resources and currency valuations have emerged as the major issues facing the region’s business people; but against this background the survey indicates a strong optimism and level of confidence in the future.

“This reflects what our customers are telling us: that this is a booming part of the world to do business, and that expectations for 2008 remain high,” Cahuzac added.

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