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July 23, 2017 | 18:15 | Dubai
Business confidence across the Middle East has fallen sharply in the last quarter and is now at its lowest level since the second quarter of 2016, according to the latest edition of the Global Economic Conditions Survey (GECS).
The region is also likely to face further challenges over the coming year, according to the quarterly survey of global CFOs and finance professionals, conducted by ACCA (the Association of Chartered Certified Accountants) and IMA (the Institute of Management Accountants).
“The sharp fall in confidence mirrors the oil price, which has fallen to below $45 a barrel in recent weeks due to fears of a further increase in US oil production” said Lindsay Degouve de Nuncques, Head of ACCA Middle East.
“Looking ahead, we may experience a further decline in sentiment within the Middle East, as a result of higher interest rates – with local rates pegged to the US dollar. We are also likely to see a fall in oil output as countries reduce production to comply with the latest OPEC deal,” added Lindsay Degouve de Nuncques.
The survey does, however, highlight the rise in government spending expectations which could act as an equilibrium to the declining sentiment. Austerity across the region, which was a constraint on growth in 2015 and 2016, has started to ease.
Recently, the International Monetary Fund (IMF) has also projected a 1.3 per cent growth in the UAE’s real GDP in 2017, which it expects to surge to 3.4 per cent in 2018, evidencing that the decline in sentiment may only be for a shorter period with confidence expecting to return in 2018.
With the impending introduction of VAT across the GCC, the short term decline in sentiment could be attributed to the transitional period which the nation is currently going through, coupled with increasing interest rates and lowering oil prices. To further fortify the region, the government continues to focus on their diversification strategies which are expected to also aid returning confidence within region next year.
The full GECS report is available here.