GCC business confidence slumped to its lowest level in nearly a year in the first quarter as regional unrest clouded companies' outlook for commerce. HSBC's GCC business confidence index fell by two points during the quarter, according to data released by the bank yesterday.
GCC confidence index falls
Business confidence in the GCC fell in the first quarter to its lowest in nearly a year as regional unrest threatened local export markets, HSBC says.
The global banking group's GCC business confidence index fell by two points from the previous quarter to 85.5 points, its lowest since last April's reading of 85.3 points.
Expectations for future regional trade dipped as more companies geared up to export to Asia, the index showed. About 40 per cent of surveyed respondents forecast higher trade with China over the next six months.
Business confidence in Bahrain was the lowest in the region, with sentiment also dipping in Saudi Arabia, Kuwait, Qatar and Oman. The UAE attracted a more positive response. "I see these results reflecting the resilience of the regional business community in a time of unprecedented change," said Tim Reid, the head of commercial banking for HSBC in the Mena region.
"Intra-regional trade is slightly down this quarter and trade with developed markets remains mixed, with a significant group expecting to see attention shift away from these historic GCC trading partners."
Global trade has picked up since last year, led by growing demand from emerging economies such as China and India. Both of those countries, along with the EU, are already the biggest buyers of GCC imports.
Regional trade prospects have been overshadowed by unrest in Egypt, Tunisia, Libya, Yemen and Bahrain.
Speaking at the World Ports and Trade Summit in Abu Dhabi yesterday, Farouk Soussa, the chief regional economist of Citi, said there was a "high risk" of turmoil in Yemen spilling over to trade markets. The country is situated on a key global shipping route.
"We are talking about costs, we are talking about rerouting shipping and other mitigative measures," Mr Soussa said.
Trade barriers were cited by other delegates as another risk to doing business. Countries have remained locked in disagreement for nearly a decade over the Doha Development Round, aimed at freeing up global trade.
"We are no nearer today to a deal as we were back in November 2001 when negotiations started," said Raed Safadi, the deputy director of the Organisation for Economic Co-operation and Development's trade and agriculture directorate.
While higher prices for oil have bolstered GCC finances, the surges in crude prices and other commodities have been cited as a potential threat to the global economy.
"That fuel increases are also fuelling increases in commodity and food prices, therefore it is not just affecting your business but the agenda of the largest economies in the world," Mr Safadi said.