Doha, 23 January 2012

Background to the Survey

The survey for the Business Optimism Index for Q1 2012 was conducted in December 2011, amid global economic uncertainty and financial instability. With this scenario, global economic growth is set to slow down further in 2012. World GDP growth started to slow down in mid-2011, when it was considered to be a temporary phase. 2011 was a year of uncertainty, with continually shifting markets, fluctuating currencies and changing trade flows. Downside risks intensified through the second half of last year and, according to the United Nations, the world could be on the brink of another recession if conditions worsen. The United Nations estimates growth of world gross product at 2.6% for 2012 and 3.2% for 2013, which remains below the pre-crisis pace of global growth. Recession in the Euro zone is now being considered a certainty due to the continued credit crunch, sovereign-debt problems, lack of competitiveness, and fiscal austerity measures. The Euro zone crisis is likely to impact not only the Central and Eastern European nations but also the US, which is also witnessing anemic growth. Recovery in US economic growth will continue to be restrained by deleveraging in the household sector which faces weak job creation, stagnant incomes, and persistent downward pressure on real estate and financial wealth. Most emerging economies are also witnessing a moderation in growth in response to reduced trade flows associated with the sharper slide in European and US activity, as well as the tightening of their respective domestic credit conditions.

The outlook for Qatar continues to be strong since most of Qatar’s hydrocarbon exports over the medium-term have already been tied up in long-term contracts. Growth in the hydrocarbon sector growth peaked in 2011 from an increase in its production capacity of LNG to 77 million tons per annum. Real hydrocarbon GDP will slow down to 3% in 2012 due to the country’s self-imposed moratorium on development of new hydrocarbon projects until 2015. In Q3 2011, the Gross Value Added for the mining and quarrying sector is estimated at QAR 97.74 bn, which represents an increase of 56.7%, over Q3 2010. With respect to Q2 2011, it shows a rise of 9.2%. Qatar’s production and exports impelled by LNG expansion and higher oil and gas prices contributed to this rise in the value addition from this sector. According to the General Secretariat for Development Planning, Qatar’s exports, propelled by LNG expansion and higher oil prices, are forecast to jump by 62% in 2011. This will increase the current account surplus to 23.6% of nominal GDP.

Commenting on the findings of the survey Manjeet Chhabra, General Manager – Middle East, Dun and Bradstreet South Asia Middle East Ltd. said:

“The business community in Qatar remains quite optimistic for the first quarter of 2012, although optimism levels in the non-oil & gas sector are marginally lower than in the previous quarter. The global economy, once again is in turmoil with the intensifying of the sovereign debt crisis in Europe and moderating growths in other parts of the world. Qatar’s economy proved to be resilient to the crisis of 2008-09, and given its strong macroeconomic fundamentals will continue to witness strong growth. The non-hydrocarbon sector has registered a 5 point drop to 40 in the composite score. All sectors have posted similar scores with respect to the composite index as in the previous quarter. The survey for the hydrocarbon sector shows that businesses expectations are stronger for Q1 2012.”

Mr Yousuf Al-Jaida Director of Strategic Development – Asset Management & Banking, at Qatar Financial Centre Authority said:

 “This latest Business Optimism Index is a very useful snapshot of how businesses in Qatar see the relatively near-term future. While concerns about banking and debt problems, particularly in mature economies, have weighed on sentiment in the first quarter of this year, businesses remain pretty confident. Optimism in the Finance, Real Estate and Business services sector is holding up especially well, which underlines the considerable opportunities the QFC Authority has to help promote the financial sector in Qatar and the Gulf region.”

Hydrocarbon Sector

The composite score for the hydrocarbon sector stands at 29 in Q1 2012 versus 20 in Q4 2011, due to higher BOI scores for the Level of Prices and Number of Employees parameters.  The BOI for Level of Selling Prices has increased to 23 in Q1 2012 from 10 in Q4 2011. 40% of the respondents in the hydrocarbon sector are predicting that prices will increase in Q1 2012, while 43% of the firms do not anticipate a change in price level. However, the Net Profits expectation of the industry players has moderated: the BOI is recorded at 26 in Q1 2012 compared to 28 in the last quarter. The BOI for Number of Employees has registered a strong gain; it stands at 42 in Q1 2012 compared to 30 in Q4 2011. 

Non hydrocarbon Sector

The BOI survey shows that the composite index for the non-hydrocarbon sector stands at 40, which is 5 points lower compared to the value in Q4 2011, due to the weakening global economy. The composite score is however significantly lower than the value in Q1 2011. Respondents have become slightly cautious in their outlook, expecting that a deepening of the banking and sovereign debt problems in advanced economies could result in a tight global liquidity condition and impact the domestic economy through channels similar to those observed in 2008–09.

The BOI scores for five of the six parameters have dropped in Q1 2012 compared to Q4 2011 levels. The BOI for the Volume of Sales parameter has marginally dropped by 3 points to 53 in Q1 2012, while the BOI for New Orders is down by 9 points to 50. The BOI score for Level of Selling Prices stands at 14, losing 9 points from the previous quarter’s reading of 23. The CPI for the month of November 2011 reached 109.5 showing an increase of 0.1 % when compared to October 2011, and an increase of 2.1%, when compared to November 2010. Inflation remains subdued in Qatar, but risks have risen due to the potential inflationary effect of the recent fiscal package.

Corresponding to the moderation in outlook for demand and prices, the Net Profits score is down by 7 points to 40. At 41, the BOI for Number of Employees has increased by 3 points from the Q4 2011 figure, the only parameter to log an improvement over the last quarter value. Scoring 22 points, the BOI for Level of Stocks has decreased by 8 points from the Q4 2011 score of 30.

Factors Impacting Business

Among the issues expected to adversely affect operations in the first quarter of 2012; shortage of skilled labor and availability of finance have been ranked by businesses as the primary influences on their business. Inflationary pressure is the leading concern for 10% of the respondents. 28% of the firms do not expect any negative factors to impact business operations. Other factors that might influence business operations in Q1 2012 which have been cited by respondents include price and availability of raw materials, lack of new projects, fluctuation in currency value and external environment.

Also, 45% of the firms plan to invest in business expansion; this figure is higher with respect to the Q4 2011 figure of 35%.

In the oil & gas segment, availability of finance and inflationary factors are leading concerns, but for 22% of the respondents there are no negative factors that could adversely impact business operations in Q1 2012. Other factors cited by respondents include no new projects, lowering of production quota by OPEC and the on-going financial crisis.

Note on Business Optimism Indices

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 April 2012.

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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
Website: http://www.qfc.com.qa