JEDDAH — Saudi business optimism in both the hydrocarbon and non-hydrocarbon sectors have brightened up in the fourth quarter of 2014 from the previous quarter, fueled, among others, by expectations that the Saudi GDP will grow 4.6 percent this year despite weakening of oil markets since mid-year 2014. The Saudi Business Optimism Index (BOI) survey for Q4 2014 released on Sunday by the National Commercial Bank (NCB), in association with the Dun & Bradstreet South Asia Middle East Ltd (D&B), showed strengthening of sentiments in the Saudi oil & gas sector, with the composite index pegged at 34 in Q4, 2014, or 9 points higher on a q-o-q basis and 4 points higher on a y-o-y basis. The BOI for selling prices has firmed up by 5 points to reach 18 in Q4, 2014, with 23 percent of the participants expecting an increase, partly to offset higher raw materials prices and partly due to anticipation of new projects. The BOI for net profits has jumped to 68 in Q4, 2014 from 35 in Q3, 2014 and has touched the highest level in the series. Respondents in the oil and gas sector are very optimistic on winning new projects and orders during the fourth quarter. The hiring outlook, however, does not reflect the strength in profitability, the BOI for number of employees has decreased from 40 in Q3, 2014 to 32 in Q4, 2014. Similar to the previous quarter, competition (14%), government rules & regulations (9%) and the lack of skilled labor (7%) remain the topmost concerns of the sector in the current quarter. The non-hydrocarbon sector firms expressed more confidence about the fourth quarter of 2014 compared to the previous quarter, but less optimistic when compared y-o-y. The composite BOI stands at 47 in Q4, 2014, 11 points higher than the index in Q3, 2014, but 7 points lower than in Q4, 2013. The rise in optimism is due to expectations of getting new projects/contracts and rising demand in the economy. However, employment-wise, the sector lowered its forecast by 6 points to stand at 38 in Q4, 2014. Commenting on the findings of the survey, Sharihan Almanzalawi, NCB economist, said “reflecting their confidence in the robustness of the Kingdom's economy, 53% of the companies surveyed in the non-hydrocarbon sector plan on investing in expansionary activities, with the sentiment in the construction sector taking the lead as 63% of the respondents in this sector plan to undertake expansion activities.” Prashant Kumar, Associate Director, Dun and Bradstreet South Asia Middle East Ltd. added: “Reversing last quarter's trend, sentiments in both the hydrocarbon and non-hydrocarbon sectors have strengthened. The BOI for the non-hydrocarbon sector has gained 11 points to 47, amid optimism in most of its index constituents, due to expectations of getting new projects/contracts and rising demand in the economy. Meanwhile, the composite BOI of the hydrocarbon sector stands at 34 in Q4, 2014, 9 points higher on a q-o-q basis and 4 points higher on a y-o-y basis. The BOI for the net profit parameter which jumped to 68 in the current quarter from 35 in Q3, 2014, not only backed the main hydrocarbon composite score but was at its highest level in the series.” Sector-wise, the construction sector has showed a stronger outlook in the current quarter compared to Q3, 2014, with a higher proportion (63%) willing to invest in business expansions compared to 51% in Q3, 2014. Sentiments of the trade and hospitality firms rebounded as the composite BOI gained 25 points to stand at 53 in Q4, 2014. The rise in the overall optimism is reflected in the stronger outlook with respect to the business environment as 63% of the firms have indicated that they will not face any hindrances to their operations in Q4, 2014 compared to 55% in Q3, 2014. 56% of the firms plan to invest in business expansion in Q4, 2014 compared to 42% in Q3, 2014. — SG
