Qatar's construction at its most optimistic for three years

Sponsored by the Qatar Financial Centre Authority ( QFC Authority ) in partnership with the Qatar Businessmen Association (QBA), the survey also reveals that the score for the Finance, Real Estate & Business Services sector was 18 points higher in Q2 2014 than in Q2 2013.

The sector's rise stems from the strong Qatari economy, higher demand for insurance for new construction and an increase in savings and investment by a growing population. Within the Finance, Real Estate & Business Services sector, the outlook for finance and insurance firms was stronger than for real estate and business services firms on volumes, new orders and profits. 

Real Estate and Business Services firms, however, were more optimistic about selling prices and hiring. These firms are benefitting from the expected rise in construction activity, which is pushing up demand for related services such as architecture and engineering consulting, building material testing and manpower supply. Moreover, the growing number of companies establishing offices in Qatar is increasing the optimism of business services firms dealing with corporates in areas such as IT, advertising and auditing.

In the Construction sector, optimism is at its highest for three years and the strongest in the non-hydrocarbon sector. The BOI score of 54 for Q2 2014 was three points up from Q1 2014 and 13 points up from Q2 2013. Higher scores for selling prices, net profits and hiring drove the overall result for Q2 2014.

Nevertheless, underlying trends in the non-hydrocarbon sector remain firm, the survey found. Of respondents in the non-hydrocarbon sector, 59% expect higher net profits, 65% expect higher sales and 67% expect higher orders in Q2 2014.

Comparing large companies and SMEs, the survey concludes that large companies are more confident about sales volumes and profitability than SMEs, but the latter are more optimistic about new orders, selling prices and employment.

Yousef Mohammed Al-Jaida, Deputy Chief Executive Officer of the QFC Authority , said: "This latest BOI Survey shows that Qatar's Finance, Real Estate & Business Services sector continues to strengthen. No fewer than 64% of respondents in the sector expect higher profits in the second quarter of 2014. Construction is emerging as a major force behind the sector's growth as well as boosting Qatar's economy more generally. These trends are further evidence of the extent to which the economy is diversifying."

On behalf of the Qatari Businessmen Association, His Excellency Sheikh Mohammed bin Faisal Al-Thani said: "Qatar's private sector is committed to playing a productive and entrepreneurial role in the development of our nation's economy, as set out in the Qatar National Vision 2030, under the wise guidance of His Highness Sheikh Tamim bin-Hamad Al-Thani, the Emir of the State of Qatar. It is clear from the BOI Survey for Q2 2014 that, on measures such as investment, employment and profitability, Qatar's businesses are fulfilling that role."

Commenting on the findings of the most recent survey, Prashant Kumar, Associate Director, Dun and Bradstreet South Asia Middle East Ltd., said: "The BOI in Q2 2014 for the non-hydrocarbon sector has improved by 7 points on a year-on-year basis, reflecting an increasing optimism amongst the business community in Qatar. Construction is observed to be the most optimistic as reflected by the fact that the sector has the highest BOI score as well as the highest proportion (49%) of businesses planning to invest in business expansion. Positive expectations for the Construction sector are driving the optimism amongst businesses in other associated sectors, with around 65% respondents in the non-hydrocarbon sector expecting an increase in sales volumes in the next quarter."

Additional key findings from the survey include:
Hydrocarbon

The BOI fell from 18 in Q1 2014 to 8 in Q2 2014, reflecting lower parameters for selling prices, net profits and hiring. The level of expectations flows from the sector's flat growth.

Manufacturing

All the sector's parameters fell. The BOI was 44 compared with 51 in Q1 2014. For example, the BOI for the sales volume parameter fell 14 points from Q1 2014 to 59 because there was an increase in the number of firms expecting a decline in sales volumes. Competition and the lack of new projects requiring their products in the coming months were cited as reasons for lower sales expectations.

Construction

Optimism is the highest for three years at 54 (up from 51 in Q1 2014 and 41 in Q2 2013) and the strongest in the non-hydrocarbon sector. The quarter-on-quarter rise is due to higher scores for selling prices, net profits and hiring. The volume of sales parameter has gained 17 points year-on-year, driven by expectations of new projects from government (infrastructure projects) as well as private sector (commercial and residential projects). The net profits parameter is up from 45 in Q1 2014 and 37 in Q2 2013 to 52 in Q2 2014. At a score of 61 in Q2 2014, hiring expectations are also up compared with 59 in Q1 2014 and 51 in Q2 2013.

Trade & Hospitality

Lower optimism for sales volumes, prices, profits and hiring depressed expectations for Q2 2014. The sector's BOI fell 4 points to 39 from the Q1 2014 score of 43, although the comparable score for Q2 2013 was 38. Significantly, however, the outlook for the trading sub-sector is much more optimistic than for the hospitality sub-sector which was depressed by the coming quiet summer season.

Transport & Communications

Investment expectations in the sector have risen sharply. Of respondents in the sector, 46% said that they will invest in expansionary activities in Q2 2014 compared with 26% in Q1 2014.The BOI slipped three points from Q1 2014 to 44 in Q2 2014, the same score as a year ago. Nevertheless, 66% of companies expected an increase in sales and 68% expected their order book to expand. The main reasons behind these robust results were demand from actual and potential infrastructure projects and growing trading activity.

Finance, Real Estate & Business Services

The sector was up 1 point from Q1 2014 and 18 points from Q2 2013. At 51, the score is the second highest since Q1 2011. Optimism among finance and insurance firms derives from the booming economy, demand for insurance for new construction and increased savings and investment by a growing population. Growth in the construction sector is driving the optimism among real estate businesses as well as construction related business services firms such as architecture and engineering consulting firms, building material testing firms and manpower supply firms. The BOI for net profits is up from 52 in Q1 2014 to 58 in Q2 2014 and 64% of firms in the sector expect higher profits in Q2 2014.

Background to the D&B Business Optimism Index for Qatar

The survey for the Business Optimism Index for Q2 2014 was conducted in March 2014. 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 Q3 of 2014.

The Business Optimism Index Q2 Qatar Report 2014 is available for download from the QFC Authority here:

www.qfc.com.qa/en-us/media-center/research-insights/business_optimism_qatar_q2.aspx

The Business Optimism Index Q2 Qatar Report 2014 is available for download from Dun and Bradstreet here:

http://www.dnbsame.com/business-optimism-index-on-qatar/