- Business optimism in the UAE has continued to grow steadily despite the recent instability within the oil & gas sector
New research from the Grant Thornton International Business Report (IBR) reveals that while business confidence in 2014 climbed to levels not seen since before the financial crisis, a recent spate of uncertainty is weighing on growth prospects for the year ahead.
With the price of oil plummeting, the future of the eurozone still far from secure, tensions in Ukraine and concern around the pace of the slowdown in China, the confidence of business leaders, especially in the world's largest three economies, has slipped as we enter 2015.
However, although there is a decline of business optimism in some markets, the UAE has continued to show progressive signs of increased business optimism as a result of economic diversification. Hisham Farouk, CEO of Grant Thornton UAE said, “the economy is strong and can accommodate market changes and open new frontiers as the UAE is known to have strong infrastructure, technology and logistics. The recent fluctuation within the oil and gas sector has led way to some debate, however Dubai’s success at diversifying its economy and the continued growth of non-oil sectors, makes it less vulnerable to lower oil revenues than other GCC oil exporters.”
The report states that private wealth has grown at the fastest pace in the UAE when comparing this to other GCC countries, with almost 80% of local business leaders feeling optimist and looking to invest in their home countries were they have greater transparency and opportunities regarding their investments.
As found last year, the greatest constraints on growth were identified as a lack of skilled workforce and a lack of ICT infrastructure which continues to hinder growth. Whereas, access to finance for SMEs is another key constraint on growth. The lack of skilled workforce has been noted as a particular concern within the leisure & hospitality sector as the UAE prepares to welcome the Expo in 2020.
Globally, the IBR shows that global business optimism for 2014 stood at an average of 41% compared to 28% in 2013 and just 12% in 2012. But in Q4, global optimism dropped from 43% to 35%, driven by steep falls in the United states (down 10 percentage points to 59%), China (down 30pp to 25%) and Japan (down 12pp to -12%).
Francesca Lagerberg, global leader for tax services at Grant Thornton, commented:
"The threat of recession and deflation in the eurozone and Japan is of growing concern. Shinzo Abe has won a new four-year mandate to try and kickstart the Japanese economy but the first round of his Abenomics programme can hardly be viewed as a success. Meanwhile, the eurozone has barely grown in five years, unemployment remains stubbornly high and a change of party in Greece could reignite the sovereign debt crisis. Add in the slowdown in China, which is dampening demand for natural resources from Latin America and exports from southeast Asia, and it’s clear that the outlook for 2015 is far from stable globally."
Francesca Lagerberg added: "Stronger global demand may boost exports next year, but flagging property investment may largely mitigate this. Meanwhile, if the US Federal Reserve finally raises interest rates next year, it could have major knock-on effects across the world, especially in a number of emerging markets.
On the contrary, the UAE has remained resilient due to its economic diversification and vision for the future. Hisham adds “the UAE seeks to innovate new sustainable and competitive economic models along with adopting more flexible approaches that boost cooperation amongst the government and private sector which suits its international position as a main economic player and the MENA hub of the world leading with the likes of London, New York, Tokyo and other key international markets.”
“The UAE’s economy has remained sustainable by its emphasis on sectors such as leisure and hospitality, financial services and education to name a few. With training and development of its people seen as key to ensure the UAE continues to innovate for years to come. The future will be looked at with buoyancy, as the people continue to be invested in being considered as the country’s real wealth.”
“In spite of all the challenges in the Middle East, the UAE has consistently tried to send an optimistic message to the world that it is safe and here to stay and as we look at the UAE economy in 2015, I can see that the governments vision and increased efforts towards economic diversification continue to firmly places the UAE on the global map.”