"Saudi Arabia's nonoil sector is projected to play an increasingly vital role for the economy, as the government's initiative to diversify away from the hydrocarbon sector will support private consumption and gross fixed capital formation," Al-Shaikh said.
The Kingdom produced an average of 9.72 million bpd of crude oil in August, up from 9.068 million bpd in Q2, and 8.732 million bpd in Q1.
"This increase in production came to compensate for the oil disruption in Libya," Al-Shaikh said, adding that the hydrocarbon sector continues to be the growth driver for the Saudi economy and the accumulation of substantial financial reserves in recent years has enabled the government to play a significant role in financing industrial and infrastructure projects.
The survey of the Business Optimism Index for Q4, 2011 was conducted in September 2011, amid an environment of significant slowdown in global economic growth, which shows little sign of accelerating. "There has been a weakening in global demand and trade as well as deterioration of business and consumer sentiment," Al-Shaikh said.
The D&B Business Optimism Index is widely recognized as a key measure of the pulse of the business community, serving as a reliable benchmark for investors, policy makers and other observers of the economy worldwide. The Business Optimism Index on Saudi Arabia, done in association with the NCB, is issued on a quarterly basis. The next Business Optimism Index on Saudi Arabia will be released in January 2012.
Al-Shaikh said businesses in Saudi Arabia had plans to continue hiring despite a gloomy global economic outlook for the remaining part of the year. "Of the nonoil and gas companies surveyed, 53 percent plan to increase their headcounts in Q4, whereas 45 percent are foreseeing no change in the number of employees" Al-Shaikh said, adding that it is even more pronounced in the hydrocarbon sector, where 75 percent of respondents expect to increase their headcounts, while 25 percent anticipate no change."
"It is also apparent that the continued improvement in credit conditions along with strong government investments in infrastructure has positively influenced the level of construction activities, as demonstrated by the rise in the BOI of the sector to an all time high of 74 points. Moreover, 70 percent of firms surveyed are expecting an increase in net profits in Q4, with the BOI of net profits rising to 67 points. Reflecting overall continued optimism, 51 percent of the nonoil and gas sector companies indicated they would invest in business expansion in Q4, 2011, up from 37 percent in Q4, 2010."
Manjeet Chhabra, general manager for the Middle East of Dun and Bradstreet South Asia Middle East Ltd., described the report as a forward-looking indicator that basically talks about the coming quarter. "Our view of Saudi economy is that it is relatively insulated and it is not completely decoupled from the rest of the world. Still all of us in the Kingdom are better placed than the other countries in the world."
"Saudi firms remain quite optimistic about the business outlook for the fourth quarter; the hydrocarbon composite index is at an all-time high of 63 and non-hydrocarbon index is at 60, which are good scores. In the non-hydrocarbon segment, the construction and trade and hospitality sectors are very bullish about the short term. The construction sector's optimistic outlook reflects the boost in confidence from the government's planned expenditure in housing and other infrastructure projects. However, some moderation in outlook is observed for the manufacturing and transport and communications sectors. The hydrocarbon sector remains very bullish as well, reflecting the increased crude oil output in recent months as well as the high oil prices. Most respondents in the hydrocarbon sector are expecting higher selling prices in the next quarter despite obvious signs indicating a slowdown in global growth. Inflation is becoming a cause for concern for respondents surveyed in September," he said.
According to the survey, the construction, trade and hospitality sectors show improvement in outlook; moderation in manufacturing sector, while the Composite Index for the hydrocarbon sector remains steady at 63, due to an increase in the BOI for number of employees but a drop in the other two parameters.
