Saudi Arabia's non-hydrocarbon sector maintains optimism level

Saudi Arabia's non-hydrocarbon sector has maintained optimism level in first quarter of 2015 compared to the last quarter as well as last year, a new survey has said.
According to Dun & Bradstreet South Asia Middle East Ltd (D&B) survey for Saudi Arabia, the hydrocarbon sector composite Business Optimism Index (BOI) is weighed down sharply by weaker expectations for prices and profitability; at 16 points, the index has shed 18 points from last quarter and is 34 points lower compared to last year.
The finance, real estate & business services sector holds the strongest optimism for Q1, 2015, supported by solid gains in the finance & insurance sub-segment, the survey said.

The survey was conducted in association with the National Commercial Bank which released the D&B Business Optimism Index (BOI).
According to the survey, 59 per cent of non-hydrocarbon sector firms and 65 per cent of hydrocarbon sector firms do not foresee any hindrances to their business operations in Q1, 2015; competition is cited as the foremost concern across all sectors. The investment outlook has moderated; 47 per cent of non-hydrocarbon firms will invest in expansion activities in Q1, 2015 versus 53 per cent in Q4, 2014.
Sharihan Almanzalawi, Economist of the National Commercial Bank, said: "While the KSA' hydrocarbon sector BOI is weighed sharply to 16 points, attributed to the free fall of oil prices, the KSA's non-hydrocarbon sector BOI maintains its optimism level, registering 48 points in first quarter of 2015".

"Apparently, the private sector expects that the government will continue to follow an expansionary fiscal policy even with declining oil prices and intron revenues, by tapping into its huge foreign exchange reserves to finance any budget deficits," he said.

"This, however, underpins the business confidence, as 59 per cent of non-hydrocarbon sector firms participated in the survey do not foresee any obstacles to their business operations, only 4 per cent above its level in the 4Q 2014," he added.
"Nonetheless, investment outlook moderated with 47 per cent of non-hydrocarbon firms indicating that will invest in expansion activities in 1Q 2015, slightly less than 53 per cent registered in 4Q 2014," Almanzalawi said.

The BOI survey highlights mixed trends in the optimism levels of both the hydrocarbon and non-hydrocarbon sectors in Saudi Arabia.
The BOI survey for Q1, 2015 said that the non-hydrocarbon sector has maintained the same level of optimism as in the previous quarter, with the composite BOI at 48 points in Q1, 2015 compared to 47 both in the last quarter and this quarter last year.
Firms have cited new projects from existing and new clients, rising demand and increasing investment as reasons for their strong outlook.