Abu Dhabi: Confidence in Abu Dhabi’s business climate dropped nearly 15 per cent in the first quarter of 2016 compared to the same quarter in 2015, with the general index falling from 61 points to 52 points.

According to the Abu Dhabi Economic Performance Report issued by the emirate’s Department of Economic Development (DED), the index on the expectations for future outlook also fell to 55 points in the first quarter of 2016, down from 64 points the corresponding period last year — a decline of 14 per cent.

The indices were also lower in the first quarter of this year compared to the last quarter of 2015. The general index on confidence in business climate fell around 9 per cent in the first quarter of 2016 compared to fourth quarter of 2015, while the index on future expectations dropped 8 per cent in the same period.

The indices are lower in the first quarter of 2016 than they have been in any of the previous four quarters.

The report said the decline in confidence reported by businesses was due to factors like inflation, higher prices of raw materials, and a decline in sales and profits of some of these firms.

Inflation in Abu Dhabi has been relatively high recently, with the consumer price index for January and February 2016 jumping 3.3 per cent compared to the same period in 2015, according to reports by the Statistics Centre Abu Dhabi (Scad).

“Although companies are exerting efforts to enhance the non-oil sector’s performance in Abu Dhabi’s economy, the business sector — particularly small and medium establishments — still requires initiatives to lessen the effect of some factors such as the hiking prices of raw materials and rents, and to facilitate [bank financing] to small and medium establishments,” a DED statement said.

Looking at geographical areas, the index for confidence in the business climate showed that businesses operating in Al Ain have a greater sense of optimism compared to those in Abu Dhabi city and the Western Region.

The index for Al Ain was at 56 points, compared to 52 for Abu Dhabi, and 53 for the Western Region.

Factors such as rent, inflation, and electricity came on top of obstacles that firms pointed out in terms of the severity of the impact, followed by water and raw material prices.

Other obstacles included the cost of finance, transportation and illegal competition. Rents remained the most significant challenge facing firms in terms of prevalence and severity of impact.