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Jobs Outlook Optimistic as Business and Consumer Confidence Increase in the UAE and Saudi Arabia

Middle East : 13 November 2011

UAE and Saudi Arabia Rank High in Nielsen Rating

Nielsen released a consumer confidence ranking, naming the UAE and Saudi Arabia among the most optimistic countries in the world. The report covers the third quarter, analyzing spending intentions and concerns.

Globally, consumer confidence fell again as 62 percent of survey respondents believe that their nations are experiencing a recession. The UAE ranked as one of the most optimistic national economies in the Consumer Confidence Index, along with Saudi Arabia.

Saving is a leading priority in the UAE, as indicated by 54 percent of survey respondents who have savings plans. Reducing personal debt is also important in both Saudi Arabia and the UAE, with both nations ranking just behind India on the Index.

Saudi Arabia’s Index score jumped by 13 points in the third quarter, reaching 120. The Kingdom adopted various economic stimuli in the past few months.

Nielsen’s Index results came as a surprise after the National Bonds Corporation survey released earlier in the year stated that 9 out of 10 UAE residents felt that their savings were inadequate to support their futures. That research, completed by YouGov Siraj, reported that 71 percent of UAE residents are not saving on a regular basis.

Business and Trade Confidence Increases in the UAE

October’s business activity surged in the UAE, pushing growth and output to a new 4-month high.

The most recent PMI (or Purchasing Managers’ Index) reached 53.8 in October with output and new orders increasing, as indicated by a Markit Economics/HSBC report.

September’s figure of 52.6 was a result of accelerating business activity after a four-month slowdown.

HSBC Middle East and Northern Africa’s commercial banking head, Simon Vaughan Johnson stated that confidence is growing steadily, as discovered by customer discussions and surveys covering business confidence.

Johnson noted that many businesses have worked hard addressing the challenges presented by the economy. This hard work is starting to pay off, resulting in increased levels of confidence.

This monthly index covers the UAE’s non-oil private sector. The most substantial non-oil economy is based in Dubai, while Abu Dhabi continues to increase the focus on this sector in attempts to diversify the Emirate economy currently dependent on crude exports.

Officials from Abu Dhabi held meetings with leading figures in India, highlighting opportunities for investment in Kizad (or the Khalifa Industrial Zone Abi Dhabi). Upon completion, this area is forecasted to become one of the biggest industrial zones on the planet.

Increasing business activities have also been reported in other Gulf nations.

Saudi Arabia experienced greater business activity this past September, the PMI increasing from 58.4 to 59.9.

The HSBC report stated that steady economic growth has clearly occurred in Saudi Arabia and the UAE.

Business confidence was highest in Qatar. HSBC also compiles information on confidence levels, reported on a separate index.

The most recent results indicate that investment budgets increased over the third quarter, with turnover expectations and profits remaining stable. The report stated that these figures indicate secure feelings beyond the steady recovery period.

Gulf businesses have also retained confidence regarding revenue growth and healthy profit margins. The report stated that companies in the region are confident in their abilities to meet both annual targets and quarterly budgets.

Gulf employers are optimistic with regards to hiring during the fourth quarter of 2011. Businesses with hiring plans increased from 39 percent in the second quarter to 42 percent in Q3.

Fewer companies plan to lay off employees, dropping from 13 percent in the previous quarter to 11 percent in the most recent report.

Saudi Arabia To Experience Surging Fiscal Surplus This Year

Increasing revenues will result in a higher surplus in spite of increased spending in the Kingdom. As oil production and prices rise Saudi’s forecasted deficit will transform into a significant surplus, even with actual spending jumping by 40 percent.

Jadwa Investment, out of Riyadh, made revisions to past estimates, forecasting the budget surplus in Saudi Arabia to jump from $33.8bn (SR127bn) to $60bn (SR226bn) resulting from greater revenues.

Low oil prices in 2009 resulted in a deficit of $23bn (SR87bn). In 2010 the Kingdom reported a surplus of $29bn (SR109bn), however this year’s projected fiscal surplus should be more than twice last year’s figure.

Actual spending in the Kingdom should increase to SR809bn, almost 40 percent higher as a result of King Abdullah’s massive handouts announced earlier in 2011 and covering over SR 500bn in spending.

Jadwa predicts revenue will hit $276bn (SR1,035bn), a significant increase over past predictions of $252.8bn (SR948bn).

Strengthening crude prices and increasing production will more than offset these spending increases.

Saudi Arabia controls more than one fifth of the globe’s recoverable crude. Last year’s plans included SR580bn in spending, revenue of SR540bn and a deficit of SR40bn. These budgets assumed a $60 per barrel average oil price, when in reality oil is forecasted to average at least $90 per barrel.

Jadwa reported that actual earnings may come in around 70 percent higher than budget, reaching nearly as high as 2008’s record income levels of SR1,101bn. Oil prices back in 2008 hit an average of $95 per barrel and production peaked at 9.2mn bpd.

The recent report indicated that high earnings in oil exports will reduce Saudi Arabia’s domestic debt, bringing it to SR160bn by the close of this year.

Forecasts state that production will hit 9.2mn bpd, up from 8.2mn bpd last year, with Saudi crude reaching $99.3 per barrel, up from $77.7 per barrel in 2010.

Greater output and higher prices will see GDP growth surge and Saudi’s oil sector expand this year. Government sector growth is expected to reach 5 percent, while private sector growth should hit 4.2 percent, according to the report.

The Kingdom’s foreign assets have also swelled as a result of stronger oil prices. At the close of 2010 SAMA’s (Saudi Arabian Monetary Agency’s) total foreign assets were at SR1,705bn. At the end of September 2011 that figure has surpassed SR2 trillion for the first time in seven decades.

Paul Holdsworth, Staff Writer, Gulf Jobs Market News
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