JEDDAH: Confidence among Saudi Arabian businesses increased in the fourth quarter backed by strong and steady oil prices and expected revival in credit, a survey by Banque Saudi Fransi showed Monday. The Banque Saudi Fransi businesses confidence index rose to 100.2 points in the fourth quarter from 99.8 in the third quarter. However, the reading was still below the Q2 level when the index was at 100.7. Company managers expect oil prices to range $75 to $85 in the next two quarters, supporting macro-economic outlook and better revenues, the survey found. The Banque Saudi Fransi Business Confidence Index climbed to 100.2 points from 99.8 points in the third quarter, the Riyadh-based bank said in a report released today. It's still below the 100.7 reading in the second quarter. More than two- thirds of the companies polled in the latest survey said they expect revenue will rise this quarter. “Steady or higher oil price outlooks among businesses underpin confidence that revenues will improve in the next two quarters,” Banque Saudi Fransi's chief economist, John Sfakianakis, wrote in the report. “Investors are more comfortable taking risks with their surplus cash than they were in Q3.” Growth in Saudi Arabia, the world's biggest oil supplier, slowed to 0.6 percent last year as crude output declined and prices dropped. The government is seeking to revive the economy with a $400 billion, five-year stimulus package that includes investments in education and renewable energy. Saudi Arabia's economy will expand by 3.4 percent this year and 4.5 percent in 2011 as it benefits from higher oil prices and government spending, the IMF said on Oct. 6. Challenges to the region include reviving credit growth and easing concerns over the “health of the corporate sector” following defaults in Gulf countries. Moreover, firms remained more optimistic about the revival of bank lending than at any other time this year. The positive sentiment was also driven by an upturn in domestic consumer demand. The survey pointed out that businesses are taking more risks with investments and expecting higher revenues. Majority of the 881 firms surveyed by the Banque Saudi Fransi during Sept. 25 to Oct. 9, expect the economy to move further toward recovery over the next two quarters. The survey pointed out that firms have set aside concerns over the euro-zone debt crisis that had hurt sentiment in the third quarter. They plan to increase production capacity, build inventories and hire staff in the coming six-month period. However, firms remained vigilant with regard to the extent to which they plan to replenish inventories of goods as fluctuations in the performance of the global economy as well as volatility in oil prices is likely to affect consumer demand at home.
