Dubai: The UAE and the Middle East as a whole are bucking global trends, with business confidence surging to its highest level since the second quarter of 2015.
That’s the finding of the latest Global Economic Conditions survey by the Association of Chartered Certified Accountants (Acca) and the Institute of Management Accountants (IMA).
Within the UAE, confidence moved from a negative outlook in the first quarter to a positive one. The Middle East region remains negative, but has improved significantly.
The key factor for the Middle East was the rise in oil prices.
“The higher oil price has caused an increase in fiscal revenues, which has led to an easing in fiscal austerity,” the report noted.
Within the UAE, oil prices were also a factor, but “extra spending related to the World Expo, which is being held in Dubai in 2020, also helped, along with an easing of fiscal austerity.”
Both nationally and regionally, the outlook is considerably more positive than 18 months ago, when the business community’s confidence dropped.
Lindsay Degouve de Nuncques, Head of ACCA Middle East, said, “The economic outlook across the Middle East and the UAE will continue to be driven mostly by the oil price and changes in fiscal policy. The recent Opec deal, which was agreed in late June and saw member countries agree to raise production, is likely to depress prices over the coming months, however with VAT being introduced across the GCC (with the UAE and KSA live), it will relieve the pressure that was once felt before this fiscal policy being introduced, which will continue to provide economic relief and reduce further oil price dependency on economic growth.”
However, she warned that the region was not immune from global shocks, so “therefore it is advisable that businesses should not be complacent.”
The report noted that the introduction of VAT in the UAE had pushed up inflation, which would reduce consumers’ purchasing power, and weigh on growth, and that higher interest rates in the US would also drag on prospects since the dirham is pegged to the dollar and local interest rates closely track those in the US.
Globally, business confidence has dipped, though the outlook remains strong.
Narayanan Vaidyanathan, head of business insights at ACCA, said, “The net dip in global confidence levels reflects factors such as fears of US-China trade wars more than compensating for other factors such as low employment and tax cuts in the US. The dip was seen both in OECD and non-OECD countries, though confidence in both groups remains relatively high by historical standards.”