Business people are quickly gaining confidence in the UAE's economic prospects, although there is a widening gap between those working in Abu Dhabi and Dubai, a new survey shows. About 74 per cent of executives in the Emirates expressed confidence in the economy, for an increase of almost 30 per cent since October, according to an index compiled by the market research company Zogby International and the management consultancy Oliver Wyman.
But that still lags behind the perceptions of executives in Saudi Arabia and Qatar. "Those in Dubai are relatively pessimistic and interested in tackling labour reform and transparency, while those in Abu Dhabi were relatively optimistic and interested in educational challenges," the survey concluded. The IMF last month more than doubled its growth expectations for the UAE, predicting the economy would grow by 1.3 per cent, but it maintained that it would be held back by a "vulnerable financial sector and a weak property market".
Initially, it had expected Dubai's economy to shrink this year and some economists still share that view. By contrast, Abu Dhabi's economy could grow between 1 and 2 per cent this year. A separate survey by Regus International found UAE companies do not expect the full momentum of recovery until the first half of next year. It also found companies here barely performed better last year than in 2008, in terms of revenues and profits.
The twice-yearly Regus Business Tracker surveys 15,000 businessmen worldwide on their companies' financial performance and growth prospects, and includes a section covering the UAE. The 2nd Oliver Wyman- Zogby Business Confidence Survey found that UAE executives were still far less optimistic than their GCC counterparts. Those in Qatar top the list, followed by those in Saudi Arabia. Looking at the whole region, 80 per cent of those surveyed in Qatar, the UAE and Saudi Arabia were "optimistic about the prospects for the next two years", the survey found.
It was based on interviews with 134 chief executives, chief financial officers and chief operating officers. More than half found "current business conditions improved". In addition, almost 75 per cent of those in the UAE were satisfied with the Government's response to the financial crisis, up from barely 50 per cent last October. The Central Bank has made available more than Dh120 billion (US$32.67bn) to the banking industry in response to the financial crisis. Many bankers and industry players have called on the regulator to inject fresh liquidity to bring down interest rates and spur new growth, notably through increased corporate lending and lower mortgage rates.
But Sultan al Suwaidi, the Governor of the Central Bank, maintains that UAE banks have enough cash to disburse and are not overly reluctant to do so. "UAE banks are very solid with high liquidity," Mr al Suwaidi told the Oxford Business Group consultancy. But he said the Central Bank would continue to indirectly control credit expansion. The UAE Central Bank obliges banks to keep deposits and loans balanced. Although several banks have wavered, the policy has forced them to be relatively cautious in their lending policies.
In addition, many banks will be forced to take write-downs in connection with Dubai World, which is looking to restructure debts of $24.8bn. That may make them more reluctant to lend, analysts say. On a separate note, almost half of the respondents of the Zogby-Wyman survey said they considered diversification to be the key to making the region more competitive. To that end, they were looking more to the East, mainly China, rather than to the West.