Saudi business optimism weakens in Q2, index shows

Optimism has weakened among Saudi Arabian businesses in the second quarter of this year, according to a new joint study from Dun & Bradstreet and National Commercial Bank (NCB).

The Business Optimism Index (BOI) showed declining composites in both the non-hydrocarbon and hydrocarbon sectors, which fell to 43 and 13, respectively in the second quarter. The hydrocarbon showing marked the lowest level since 2009. The outlook for selling prices and profitability was also cautious.

Fluctuation in oil prices remained the primary concern for hydrocarbon sector firms. Meanwhile, the availability and cost of skilled labor, as well as government regulations were seen as the main obstacles for non-hydrocarbon firms.

Despite this drawback, 49 percent of non-hydrocarbon firms said they still intend to invest in business expansion. Finance, real estate and business services dominated this trend, with 56 percent of respondents in those sectors aiming to push ahead with their growth plans. 

The composite BOI for the finance, real estate and business services sector kept flat year-on-year at 48 in second quarter, whereas the index has slipped four points compared to the previous quarter.

The outlook for manufacturing is modestly weaker, mainly due to lower-than-expected selling prices. Meanwhile, the construction sector also saw its BOI drop four points between the first and second quarters of 2015.

The trade and hospitality also showed lower levels of optimism, reaching 36 in Q2, compared to 44 in Q1 and 53 in Q2-2014.

The index also found that larger companies were much more confident about their performance and prospects, when compared to small-and-medium enterprises (SMEs) in the kingdom.