UAE business confidence dips
Rising government expenditure index and 2017 growth estimates fly in the face of prevailing sentiment
Economic conditions in the UAE are expected to improve this year, but optimism among businesses remains subdued, according to the latest report.
The Global Economic Conditions Survey by the Association of Chartered Certified Accountants (ACCA) and the Institute of Management Accountants (IMA) showed that business confidence in the country dropped to -23.7 in the fourth quarter of 2016, lower than in the preceding two quarters of the year and a far cry from +41.8 in the first quarter of 2014.
The survey also indicated that business confidence levels in the Middle East and the rest of the world have also declined, owing to political and economic uncertainties, as well as weak oil prices. The slump in sentiment in the UAE has been due mainly to tightening employment conditions.
“Business confidence has dropped due to the fall in employment confidence, which include job cuts and/or freezing recruitment,” Faye Chua, head of business insights at ACCA, told Gulf News.
“It is expected that on the whole, growth in the UAE should improve in 2017.”
ACCA’s report also noted some very positive signs. The country’s government expenditure index, for one, has been rising to its highest level since the third quarter of 2015. “Although the economy has been hit hard by the decline in the oil price, [it] has managed the adjustment to lower oil prices faster than other countries in the region.”
“Austerity is expected to ease in 2017, and the prospect of the 2020 World Expo and Iran’s improving relationship with global trade offer encouragement for future investment. Yet, while growth is set to improve this year, confidence has fallen slightly as the region’s performance impacts on prospects,” said Lindsay Degouve de Nuncques, head of ACCA Middle East.
Across the Middle East, 51 per cent of companies reported they feel less optimistic about the future. The fall in the region’s business confidence has been attributed to weak oil prices and lower government spending.