YPO Global Pulse: Business confidence wanes in Middle East and North Africa

Chief executives report more subdued outlook in first quarter of the year, a reversal of the previous quarter’s upswing

ABU DHABI, 9 May 2017 YPO, the premier chief executive leadership organisation in the world, reported today that confidence among business leaders in the Middle East and North Africa (MENA) declined in the first quarter of the year (1Q 2017).

The YPO Global Pulse Confidence Index for MENA, which tracks economic confidence levels among chief executives in the region on a quarterly basis, slipped 4.3 points to 55.2.

The decline in sentiment reversed most of the gains achieved in the fourth quarter of 2016, when the Index jumped 5.6 points, from 53.9 to 59.5 across the region. MENA now trails the global composite score of 62.5 by 7.3 points, its biggest deficit in the seven-year history of the survey.

For the Arab countries in the region, after an upward swing in confidence during the fourth quarter of 2016 to 39.1, chief executive confidence dropped to 32.9 in 1Q 2017. This dampened confidence follows austerity measures taken by most of these nations. The decline in confidence is largely driven by a significant fall in Saudi Arabia, which reported a confidence crash of 11.7 points, from 54.1 to 42.4, in firmly pessimistic territory.

“Chief executives in Saudi Arabia were less optimistic about their outlook for fixed investment for Q1 2017 as the kingdom bore the brunt of OPEC cuts,” explains Dr Florence Eid-Oakden, Founder and CEO of Arabia Monitor and a member of YPO. “We could see an improvement in business confidence in Q2 2017 as liquidity conditions improve, non-oil private sector growth picks up pace, and given how successful the bond and sukuk issuances have been in Q4 of 2016 and Q1 of 2017.”

The loss in confidence was not isolated to Saudi Arabia with many of the largest economies in the region reporting similar declines, on the back of a turbulent three months.

In Lebanon, business confidence significantly declined, losing 6.1 points to land at 55.0. The United Arab Emirates (UAE) saw a modest drop in confidence, edging down 2.7 points to 57.0.

Conversely, Egypt reported a significant gain in confidence around the world with a surge in confident of 14.9 points to the firmly optimistic territory of 79.4.

Globally, the YPO Global Pulse Confidence Index edged up 0.3 point to 62.5 over the quarter, its highest level since January 2015. For the second consecutive quarter, the United States reported the highest level of confidence across the globe, inching up 0.3 point to 64.9. Confidence in the European Union (EU) remained flat at 60.9, while Asia climbed 2.1 points to 63.3, its highest level since April 2015. Elsewhere, confidence in Latin America dropped by 1.2 points to 57.1, while Africa, the second-least confident region in the world edged down 0.3 point to 54.4, and non-EU Europe reported the lowest level of confidence in the world, falling 2.5 points to 51.8.

Key findings in MENA

Business leaders split on short-term economic climate

When asked to assess business and economic conditions over the next six months, chief executives were split, with 39% reporting that the economic environment will improve over that period, while 37% expected it to stay relatively unchanged, and 24% predicted that conditions would deteriorate.

Forecasts for growth downgraded

Business leaders in MENA were less positive about the prospects for their own organisations, as the three key indicators of the YPO Global Pulse Confidence Index, measuring sales, employment and fixed investment, all declined in 1Q 2017.

The YPO Sales Confidence Index for the region showed that more than half (53%) of chief executives expected to improve their turnover in the next 12 months, while 11% predicted reduced revenues. This was a more pessimistic view than in the previous survey in January, when 67% expected to increase revenue over the following year and only 6% predicted a reduction.

The situation was similar when it came to the YPO Employment Confidence Index, where chief executives were evenly split, with the same proportion (22%) of respondents predicting an increase in headcount over the next 12 months, as those expecting to reduce the size of their workforce. In the January survey, 35% expected to increase hiring and only 6% predicted a cut in staff numbers.

Business leaders were also less confident about fixed investment, with the YPO Fixed Investment Index for the region indicating that 43% of chief executives expected to increase fixed investment over the next year while 17% expected reduced investment levels. In the previous survey, 45% were bullish about investment and only 9% expected cuts to spending.

YPO Global Pulse Confidence Index
The quarterly electronic survey, conducted in the first two weeks of April 2017, gathered answers from 1,216 YPO chief executive officers across the globe, including 49 in the Middle East and North Africa. Visit www.ypo.org/globalpulse for more information about the survey methodology and results from around the world.

About YPO
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Linda Fisk
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press@ypo.org

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