One in three Saudi firms expect over 10% growth in 2018: EY

Middle-market businesses in Saudi Arabia are "significantly more optimistic" about revenue growth and business opportunities this year than last year, with 33 percent of the firms expecting in excess of 10 percent growth in 2018, according to the annual EY Growth Barometer.

However, six in ten firms are targeting a growth of 6 to 10 percent, a 24-percentage point increase compared to last year's survey.

Over one third (35 percent) of Saudi respondents regard regulation as the top driver of innovation, up 28 percentage points compared to 2017, the report noted.

“Company leaders of middle-market companies in Saudi Arabia are riding a wave of ambition and confidence, as set out by Vision 2030 and the National Transformation Program," said Fahad Altoaimi, managing partner - Saudi Arabia, EY.

"Contrary to the common belief that regulation stifles growth and innovation, Saudi executives believe that reforms set by the crown prince have been driving change and growth in the Kingdom. The decision of MSCI to add Saudi Arabia to its Emerging Markets Index is a testament to the progress being made in the Kingdom and the positive effects of the reforms.”

Meanwhile, firms were concerned about cash flow shortages, citing “insufficient cash flow as the number one challenge to growth this year.”

Approximately a third (34 percent) of Saudi companies surveyed currently rely on bank finance for funding, but were looking at raising funds through capital markets, given that the Kingdom aims to upgrade its stock exchange and open it to foreign investors.

Almost three-quarters (73 percent) of executives were considering launching an initial public offering (IPO) -  a sign of burgeoning business confidence, EY noted.

Meanwhile, 82 percent of respondents said they would adopt artificial intelligence (AI) and implement robotic process automation by 2020 compared to 94 percent who ruled out adopting robotic process automation last year. In fact, 95 percent of respondents said they intend to do so within the next five years.

According to the EY survey, 29 percent of the respondents said they were looking at overseas expansions, while 18 percent of middle-market businesses were aiming to grow at home.

Buoyed by confident revenue growth targets, 58 percent of firms were looking to recruit more full-time staff, with 62 percent of the respondents putting diversity at the top of their recruitment agenda.