Saudi Arabia businesses outlook still strong

Jeddah - Dun & Bradstreet South Asia Middle East Ltd (D&B) in association with the National Commercial Bank released the D&B Business Optimism Index (BOI) survey for Saudi Arabia for Q1 2014. The BOI survey revealed a moderation in overall optimism level.

Background to the survey

The survey for the Business Optimism Index for Q1 2014 was conducted in December 2013 with inputs from 500 companies in the kingdom across all key sectors of the Saudi Economy. These businesses were asked to indicate if they anticipated an 'increase', 'decrease' or 'no change' on key outlook indicators including volume of sales new orders, selling prices, net profits, number of employees, and level of stock. The survey also captures respondents' feedback on current business challenges and their future investment plans.

Key Findings

Saudi Arabia's economy expanded at an annual rate of 3.1% in Q3 2013, after posting a growth of 2.1% in Q1 2013 and 2.7% in Q2 2013, according to the Central Department of Statistics. The increase in Saudi oil production since the end of the second quarter was the main driver behind this growth. Further, the oil sector's contribution turned positive for the first time since the last quarter of 2012. Growth in the oil sector, which accounts for nearly half of the economy, was 3.1% y-o-y in between July and September, after a 3.7% drop in the second quarter. The Kingdom's oil output averaged 10.1 million bpd in the third quarter compared with 9.8 million bpd for the same period last year. This increase in oil production was mostly due to elevated domestic oil consumption during the summer months as well as to offset the shortfall in global oil production.

The average monthly OPEC basket eased from US$ 108.73 per barrel in September to US$ 106.69 per barrel in October and US$ 104.97 per barrel in November due to easing of tensions in the Middle East.

Negotiations between the West and Iran surrounding Iran's nuclear program partly mitigated the political tension that had led to an elevation in oil prices this year. After dipping sharply in early November, crude oil prices rallied through the rest of the month and averaged US$ 107.67 per barrel in December, regaining all of the previously lost ground due to a slew of encouraging economic data, particularly in developed countries, which boosted the prospect of global oil demand. The outlook for many parts of the global economy is improving and there may be a broadly synchronizbalerínky