Saudi business community buoyant as optimism levels advance in Q4

24/11/2014 06:46 AST

Dun & Bradstreet South Asia Middle East Ltd. (D&B) in association with the National Commercial Bank released the D&B Business Optimism Index (BOI) survey for Saudi Arabia for Q4, 2014.

The BOI survey highlights the increasing optimism levels of both the hydrocarbon and non-hydrocarbon sectors in Saudi Arabia.

Background to the survey

Saudi Arabia’s economy is likely to grow 4.6 percent this year, more than previously estimated, aided primarily by the robust performance of the private sector, according to the IMF.

Saudi Arabia has been one of the best performing G-20 economies in recent years, and has supported the global economy through its stabilizing role in the global oil market.

Real oil sector GDP growth for 2014 is projected to be 0.6 percent, as the Kingdom has kept its output high this year to make up for Libya’s outage, but is expected to trim production in 2015-16 to take account of Iran’s likely return to oil markets and the continued gains in the North American supply. This scenario assumes that the situation in Iraq will remain contained, but in a worst case scenario, Iraq’s exports of around 2.5 million bpd could be lost all together. The Kingdom’s oil production averaged 9.769 million bpd in Q3, 2014, 9.715 million bpd in Q2, 2014 and 9.723 million bpd in Q1, 2014 compared to 9.637 million bpd in 2013 (OPEC data).

The Central Department of Statistics and Information’s GDP data for Q2, 2014 revealed that the oil sector grew by 2.5 percent y-o-y, compared to 6.1 percent in the previous quarter. The oil output in Q2, 2014 rose by 1.9 percent y-o-y, to 9.7 million bpd. The IMF expects the Kingdom’s current account surplus to decline from $ 134.3 bn in 2013 to $ 120.2 bn in 2014 as oil production remains flat and prices continue to weaken. The OPEC reference basket fell for the third consecutive month in September 2014 ($107.89 per barrel in June versus $ 95.98 per barrel in September 2014) as weak demand, ample supply, a stronger US dollar, and weak economic data from China and Europe continued to put pressure on the oil market since the end of June this year.

Commenting on the findings of the survey, harihan Almanzalawi, economist of the National Commercial Bank, said: “Despite the continuation of weakening of oil markets since mid-year 2014, with Brent crude prices declining to the $70-$80 per barrel range, both non-hydrocarbon and hydrocarbon composite BOI’s rose to 47 points and 34 points, respectively, in the Q4, 2014. Moreover, reflecting their confidence in the robustness of the Kingdom’s economy, 53 percent of the companies surveyed in the non-hydrocarbon sector plan on investing in expansionary activities, with the sentiment in the construction sector taking the lead as 63 percent of the respondents in this sector plan to undertake expansion activities. Meanwhile, sentiment in the hydrocarbon sector weakened, as lower percentage of 28 percent of the respondents in this sector indicated that there will be no negative factors affecting their business operations in the Q4, 2014, compared to 55 percent in the Q3, 2014.”

For more on this Click Here

Arab News