Optimism levels rise in Kingdom despite weak economic growth worldwide

JEDDAH: Composite Business Optimism Index (BOI) for the non-hydrocarbon sector increases by 10 points to 47 in Q4 2012 on the back of strong sales, according to a survey report.
The National Commercial Bank, in association with Dun and Bradstreet South Asia Middle East Ltd. (D&B), has released the Business Optimism Index (BOI) for Saudi Arabia for the fourth quarter of 2012, which also focused on new orders and profitability outlook, composite BOI for the hydrocarbon sector moves up to 25 points as profitability outlook rises, availability of skilled labor is a chief concern for the non-hydrocarbon sector, while the impact of inflationary pressure remains the topmost concern for hydrocarbon companies.
The survey for the BOI for Q4 2012 was conducted in September 2012, a time when the world economy has been growing at a tepid pace and is expected to continue to face several challenges in the coming months.
There are four key weaknesses that continue to feed into each other and collude against any healthy economic recovery. First, the ongoing deleveraging by banks, firms and households is holding back normal credit flows and consumer and investment demand. Second, unemployment remains high, especially in developed nations, which is a condition that is both a cause and effect of the lack of economic recovery. Third, fiscal austerity responses to deal with rising public debts are further deterring economic growth, which in turn is making a return to debt sustainability all the more difficult. And fourth, bank exposure to sovereign debts and the weak economy are perpetuating financial sector fragility, which in turn is spurring continued deleveraging.
Recessionary conditions continue in the euro zone, reinforced by intensifying fiscal austerity and rising unemployment. Weakness is becoming more evident in the larger economies, with economic conditions softening further in France, and business confidence moving decisively lower in Germany alongside the reduction in European trade. In the United States, real GDP decelerated to 1.3 percent in Q2 from 2 percent in Q1 2012, as domestic fiscal issues and global uncertainty regarding the European debt crisis led consumers and firms to hold back on spending and investment.
Commenting on the findings of the survey, Said Al-Shaikh, Senior Vice President and Group Chief Economist of the National Commercial Bank, said at a press conference, “As the global economic growth outlook continues to face several challenges, attributed largely to Euro debt crisis, moderating growth in China, and the “fiscal cliff” in the US, only 25 percent of the firms surveyed in the Kingdom indicated that the business environment due the global economy will not impact their business operations in the 4Q 2012 compared to 45 percent in Q3.”