NCB Senior Vice President and chief economist Dr. Said Al-Shaikh (left), with Rohan Nagpal, manager, Research and Advisory Services, D&B, during the presentation of the Business Optimism Index survey in Q4 of 2012.JEDDAH – Saudi businessmen and entrepreneurs remain bullish about the prospects in the fourth quarter of this year as revealed by the latest Business Optimism Index survey conducted by the National Commercial Bank in association with Dun and Bradstreet. The survey showed that Saudi Arabia's hydrocarbon sector optimism has improved in Q4 2012, gaining 2 points to 25 from 23 in the third quarter of 2012. Though two out of three parameters have retreated from Q3 levels, a strong rebound in the profitability outlook has helped the composite index to log an uptrend. The parameter score for net profits has spiked by 25 points to 48 in Q4 2012 from 23 in the previous quarter. The level of selling prices expectations of the industry players have moderated by 3 points to 5 in Q4 2012. The BOI for number of employees too has lowered to 40 in Q4 2012 from 53 in the third quarter of 2012. The composite index for the non-hydrocarbon sector stands at 47 in Q4 2012, compared to the index score of 37 in the third quarter of 2012. The BOI survey revealed that five out of the six non-hydrocarbon sector parameters have improved in Q4 2012. The BOI for the volume of sales parameter has registered a value of 56 compared to 39 in Q3 2012, while the BOI for the New Orders parameter is recorded at 57 compared to 52 in Q3. The BOI for level of selling prices stands at 19 in Q4 2012, compared to 15 in the last quarter. The inflation rate in Saudi Arabia was recorded at 3.8 percent in August 2012. There is expectation of a relative stability or a slight increase in the inflationary pressures in the coming period. Profitability expectations have also strengthened from the previous quarter. The BOI for the net profits parameter is recorded at 53 in Q4 2012, up from 37 in the third quarter of 2012. The BOI for Number of Employees has improved by 4 points to 48 from 44 in Q3 2012. The BOI for level of stock stands at 16 in Q4 2012, down from 29 in the previous quarter. Four out of the five business sectors in the non-hydrocarbon sector have registered higher optimism levels while the one has tracked sideways. The construction sector holds the most optimistic outlook among the various sectors surveyed for the fifth consecutive quarter. The manufacturing sector holds the least optimistic outlook for Q4 2012. Answering a question from Saudi Gazette on the possibility of subsidizing the prices of basic goods to offset the effect of inflation, Senior Vice President and chief economist of the National Commercial Bank Dr. Said Al-Shaikh said that though rising inflation is a cause of concern, any subsidy move is “distortionary.. and will lead to waste." He said that in lieu of that, raising the salaries of workers is a better option since it gives the workers the ability to deal with the development and where to spend it. “As the global economic growth outlook continues to face several challenges, attributed largely to euro debt crisis, moderating growth in China, and the “fiscal cliff" in the US, only 25 percent of the firms surveyed in the Kingdom indicated that the business environment due the global economy will not impact their business operations in the 4Q 2012 compared to 45 percent in Q3," he further said. “However, despite this fragile global economic growth outlook, the Kingdom's BOI for the non-hydrocarbon and hydrocarbon sectors have improved in fourth quarter compared to the third quarter, rising by 10 points and 3 points, respectively. While the strong rise in profitability parameter compensated for the lower reading of selling price parameter, and accordingly, contributed to the improvement of 4Q hydrocarbon sector's BOI , the rise in the readings of the parameters of volume of sales, new orders and profitability have contributed to the rise in the non-hydrocarbon sector's BOI in the 4Q 2012. Meanwhile, reflecting continued positive economic outlook, 59 percent of the non-hydrocarbon companies surveyed said that they would invest in business expansion in the third quarter compared to 62 percent in the third quarter of the current year, only 3 percent down from previous quarter." Commenting on the findings of the survey, Rohan Nagpal, manager, Research and Advisory Services, D&B, said “business sentiments among Saudis have improved in the fourth quarter of 2012." The BOI survey for Q4 2012 revealed higher optimism levels compared to those recorded in the previous quarter. The hydrocarbon index has improved to 25 from 23 in Q3 mainly on account of a strong rebound in profitability outlook. The non-hydrocarbon sector optimism index too has improved to 47 from 37 in the third quarter of 2012. The survey also revealed that around 25 percent of the firms feel that their businesses will not be impacted by any negative factors. This proportion has taken a downward hit as compared to the last quarter and is attributed largely to concerns associated with global economic recovery. Most non-hydrocarbon sector businesses are concerned about availability of skilled labor whereas inflationary pressure is a leading concern for the hydrocarbon industry players. With an improvement in business sentiments, most businesses in both hydrocarbon as well as the non-hydrocarbon segments, plan investment in business expansion in Q4 2012. — SG
