Doha, 24 October 2010

Highlights:

• The Composite Business Optimism Index for the hydrocarbon sector has retreated to 40 in Q4 from 46 in Q3. The selling price outlook remains unchanged from Q3’s high score of 63; however falls in Net Profit and Employees indices have caused the fall we see in the composite index
• The Composite Business Optimism Index for the non-hydrocarbon sector remains at 39 constant with Q3’s reading
• Within the non-hydrocarbon sector Trade & Hospitality and Finance & Business Services sectors saw the best advances in optimism. In contrast the Construction sector recorded a deep decline in optimism
• The business community remains optimistic about prospects in the Qatar economy; the economy being somewhat insulated from the mixed signals on economic growth being portrayed around the World

Doha:  Dun & Bradstreet South Asia Middle East Ltd (D&B) in association with Qatar Financial Centre (QFC) Authority released the D&B Business Optimism Index for Qatar for Q4 2010.

Background to the Survey
The survey for the Business Optimism Index for Q4 2010 was conducted in September, amidst an environment of growing speculation among investors that the world economy might slow down in the coming months. The IMF has warned that world growth remains fragile and uneven, and will slowdown in 2011 due to a still weak financial sector and concerns regarding public finances in Europe, Japan and the US. In its latest estimate, IMF has revised the world growth downwards for 2011 from 4.3% to 4.2% and growth in 2011 will be lower than the 4.8% growth projected for 2010.

Qatar’s economy, one of the fastest growing economies in the world, will again post double digits growth in 2010 and 2011; driven not only by the oil and gas sector but also by the non-energy segment. The economy is projected to grow at 16% in real terms in the current year and at 18.6% in 2011 according to the IMF’s most recent World Economic Outlook.  Contributing 53.8% to the country’s nominal GDP in 2009, the non-hydrocarbon sector overtook the hydrocarbon sector for the first time in its share of GDP; while the gas sector overtook oil as the single largest contributor to the economy. Qatar’s stable macroeconomic environment, high quality institutional framework and the government’s diversification policies have helped the country to achieve a ranking of 17 in the World Economic Forum’s Global Competitiveness Index for 2010-11, the highest rank in the MENA region.

Commenting on the findings of the survey Phil Strange, CFO of Dun and Bradstreet South Asia Middle East Ltd. said:

‘Business optimism in Qatar remains robust at very healthy levels displaying an ability to rise above the economic uncertainties that are rife in the majority of the World’s economies at present. However, the Construction sector has seen a significant deterioration in sentiments as local falls in prices and potential over supply weigh on the business community. It must also be mentioned that optimism for New Orders fell in all sectors suggesting a potential slow down in activity in the New Year. ’

Hydrocarbon Sector
The D&B BOI survey reveals that Qatar’s hydrocarbon sector optimism has suffered a setback in the fourth quarter due to a lower BOI score for Net Profits and Number of Employees. The overall BOI composite score for the sector has dropped to 40 as against 46 in the third quarter.  The BOI for Level of Selling Prices remains unchanged in Q4 2010. This highlights expectations of a slowdown in global economic recovery and hence oil demand. As a result, the net profits expectations of the industry players have also been dented, the BOI for which is recorded at 18 as against 25 in the last quarter. The BOI for number of employees has also posted a dip, dropping to 15 in Q4 from 35 in the third quarter.

Non hydrocarbon Sector
The sector has recorded a BOI of 39 flat with Q3’s reading; a sharp drop in the New Orders parameter offsetting modest rises in the other five parameters.

Due to expectations of slower global economic growth in the short term, the BOI for the New Orders parameter has dropped sharply in Q4 2010 to 18 from 49 in the previous quarter. Optimism has picked up for the remaining five parameters in the non-hydrocarbon sector. The BOI for the Volume of Sales parameter has increased by 11 points to 60 in Q4 2010, while the BOI for Selling Prices has gone up by 3 points to 22. Inflation is expected to stay low this year as slumping rents counter the effect of higher food prices. Supported by an increase in outlook for sales and prices, the Net Profits parameter has posted a strong increase with a gain of 13 points to 59 in Q4.

With expectations of strong growth in the domestic economy, respondents’ optimism with respect to hiring has also gained over the previous quarter. The BOI for the Number of Employees parameter has increased by 5 points to 39 in Q4 from 34 in Q3. The BOI for the Level of Stock parameter has registered a 16 points jump to 49 in Q4.

Factors Impacting Business
Raw material costs continue to be the top concern for non-hydrocarbon firms in Q4; 48% of the respondents citing it as their leading concern. Property prices and rents have emerged as the second most important concern for the respondents with 22% citing it. Availability of finance has been relegated to third place at 17% reflecting the easing of credit in the economy.

41% of firms plan to invest in business expansion; this figure has increased as compared to the previous quarter.

In the hydrocarbon sector, project delays remain the top concern for majority (55%) of the respondents in the fourth quarter, but discovery & development costs are also important.

Shashank Srivastava, Acting CEO of the Qatar Financial Centre Authority said:
“The research findings confirm Qatar’s unique positioning as one of the world’s fastest growing economies. Despite the continuing uncertainty about the strength of the global recovery, Qatar is successfully implementing its strategy to diversify its economy. The finding that the Finance and Business Services sector has one of the greatest increases in optimism is in line with our experience at the QFCA, where we find businesses in this sector expressing a high level of confidence about their prospects. This reflects both the strong growth fundamentals in our economy and the increasing range of opportunities in financial services in Qatar”.
 
Business optimism indices are commonly used to get a better understanding of the growth expectations of the business community and its response to current developments within an economy. Issued quarterly, the D&B’s Business Optimism Index for Qatar is based on an extensive survey conducted amongst the Qatari business community. The next Business Optimism Index for Qatar will be released in January 2011.

For further information:
Press Contacts:
Dun and Bradstreet South Asia Middle East Ltd.

Qatar Financial Centre Authority
Stephen Carriere
Head of Marketing and Corporate Communications
Qatar Financial Centre Authority
Tel: +974 4496 7784 - email: s.carriere@qfc.com.qa
www.qfc.com.qa

About Dun and Bradstreet
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About QFC
The Qatar Financial Centre (QFC) is a financial and business centre established by the Government of Qatar and located in Doha. It has been designed to attract international financial services institutions and major multi-national corporations and to encourage participation in the growing market for financial services in Qatar and elsewhere in the region. The QFC operates to international standards and provides a first class legal and business infrastructure for those operating within the QFC. The QFC was created by Qatar Law No. (7) and has been open for business since 1 May 2005.

QFC Authority
The QFC Authority is the commercial, administrative and legislative body responsible for driving the commercial strategy of the QFC and for developing relationships with the global corporate community and other key institutions both within and outside of Qatar.