Chief executives in the Middle East and North Africa (Mena) region are seeing a ray of sunshine while most of the world is covered in gloom.
The latest confidence index released yesterday by the Young Presidents’ Organisation (YPO), a not-for-profit network of 20,000 CEOs, showed that there is a slight increase in the level of optimism among executives in Mena. Factors like strong oil prices and ongoing economic diversification in some parts of the region such as Saudi Arabia have led to improved sentiment.
In its report, YPO said the region’s confidence index increased by 1.9 points to 60.3 in the first three months of 2013. Mena is the only region to gain ground, while confidence in other major markets declined in the first quarter.
Within the European Union, overall sentiment among CEOs dropped 4 points, as the euro faces an uncertain future following the financial crisis in Cyprus. In the US, the index declined one-tenth of a point to 60.9, suggesting that executives expect the economy to grow at a moderate pace.
Some countries in the region, including UAE, have recently shown signs of an economy picking up. The country’s GDP posted 4.2 per cent growth in 2012, while more companies announced plans to expand their head counts and real estate prices and rents have made a comeback.
YPO said the moderate uplift in the region is boosted by optimism among CEOs in Saudi Arabia, UAE and Oman. Optimism, however, declined in Egypt and Libya.
“Certainly, key Mena markets such as Saudi Arabia and the UAE continue to deliver growth, though arguably only modest growth in the UAE. In Saudi, we have yet to see the impact of the new expatriate employment regulations, so we need to carefully monitor developments on this front,” Steve Hamilton-Clark, CEO for Mena of TNS Middle East and North Africa, told Gulf News.
“In Egypt, the other big Mena player, business growth is elusive and likely to head into worryingly negative territory in the medium term,” he added.
Executives are also feeling positive about sales, employment and fixed investment plans. The sales confidence index for Mena edged higher by 2.6 points to 67.8, while the employment and fixed investment components of the index advanced 1.8 and 3.5 points respectively.
In its report, YPO noted that more than half of the service companies (51 per cent) are planning to expand their staff over the next 12 months in the manufacturing and construction sectors.
Small companies reported the most aggressive hiring intentions, with 57 per cent planning to expand head counts, compared to 33 per cent of large firms and 45 per cent of medium-sized enterprises.
Many CEOs (44 per cent) reported plans to increase capital spending over the next 12 months. Globally, only 40 per cent intended to do the same.