YPO Global Pulse: Business confidence plummets in Middle East and North Africa in second quarter

14

Confidence amongst MENA chief executives falls to eight-year low

ABU DHABI: YPO, the premier chief executive leadership organisation in the world, reported today that confidence among business leaders in the Middle East and North Africa (MENA) continued to decline in the second quarter of the year (2Q 2017).

The YPO Global Pulse Confidence Index for MENA, which tracks economic confidence levels among chief executives in the region on a quarterly basis, fell 4.5 points to 50.7, translating to an 8.8-point decrease for the first half of 2017, and its lowest level in the eight-year history of the survey.

Chief executives in MENA are now less confident than their counterparts in every other region of the world, and their confidence rating trails the global composite score of 62.0 by 11.3 points. Following a drop in the first quarter of 2017 to 32.9 from a pickup in fourth quarter of 2016 to 39.1, CEO confidence in the Arab countries fell to 29.6 in Q2 2017, the lowest reading since the YPO survey began in 2009.

Most of the major economies in the region experienced a decline in sentiment over the quarter, including the United Arab Emirates, Lebanon and Pakistan; while confidence in Saudi Arabia remained in deeply pessimistic territory, edging up 0.3 point to 42.7. Gulf Cooperation Council (GCC) countries also reflected a downward trend, falling 0.9 point to 49.2, dropping below the 50.0 mark into negative territory for the first time.

“As we anticipated for the second quarter, CEO confidence dampened further as some GCC countries scaled back spending, raised taxes and bear the brunt of OPEC oil production cuts. The escalation of hostility with Qatar could put a further dent in confidence in the third quarter of 2017,” said YPO member Dr Florence Eid-Oakden, Founder and CEO of Arabia Monitor.

Key findings in MENA

Economic climate set to deteriorate further

Chief executives were less than optimistic when asked to assess business and economic conditions over the next six months. Almost half (46%) predicted that the economic climate would deteriorate in the second half the year, while only 18% believed that the economic environment would improve. A third (36%) expected to see little change.

Forecasts for growth downgraded

Business leaders in MENA were also less positive about the prospects for their own organisations over the next year, as the three key indicators of the YPO Global Pulse Confidence Index, measuring sales, employment and fixed investment, all declined to record lows in the second quarter.

The YPO Sales Confidence Index fell by 3.6 points to 55.7. Less than half (43%) of chief executives expected to increase revenue over the next 12 months, whilst 13% predicted a decline in turnover. The remaining 44% felt that sales would stay flat for the next year.

It was a similar situation when it came to hiring intentions, as the YPO Employment Confidence Index for the region slumped 3.0 points to 48.6. Only 14% of business leaders forecast an increased headcount over next year, versus 26% who predicted cuts to staff numbers; while the majority (60%) expected the size of their workforce to remain unchanged.

Finally, the YPO Fixed Investment Confidence Index fell by 1.9 points to 54.5. The majority (64%) of chief executives believed that investment levels will stay at the same level over the next 12 months, while about a quarter (24%) predicted an increase in investment, and 12% forecast a reduction.

Global review

Globally, the YPO Global Pulse Confidence Index slipped 0.5 point to 62.0 over 2Q 2017, while executives in Australasia proved to be the most optimistic, as their confidence levels increased 3.6 points to 67.0. In Asia, confidence declined 1.8 points to 61.5, reversing the gains made in the first quarter of the year. Confidence in the United States remained firmly in positive territory, with a slight decline of 1.6 points to 63.3, while in Canada, confidence rose 0.8 point to 62.9.

In the European Union (EU), confidence climbed 2.1 points to 63.0, its highest level in the eight-year history of the YPO study; while executives in non-EU Europe countries indicated a dramatic improvement, up 8.5 points to 60.3, largely due a complete reversal in Swiss sentiment, which was the main detractor in the region last quarter.

Elsewhere, confidence in Latin America climbed 2.1 points to 59.2, its highest level since January 2014. In Africa, business confidence edged up 1.9 points to 56.3, but despite this being its highest level for two years, it still retains its position as the second-least confident region.

YPO Global Pulse Confidence Index 
The quarterly electronic survey, conducted in the first two weeks of July 2017, gathered answers from 1,161 YPO chief executive officers across the globe, including 30 in MENA.

About YPO 

The premier leadership organization of chief executives in the world.

YPO is the global platform for chief executives to engage, learn and grow. YPO members harness the knowledge, influence and trust of the world’s most influential and innovative business leaders to inspire business, personal, family and community impact.

Today, YPO empowers more than 24,000 members in more than 130 countries, diversified among industries and types of businesses. Altogether, YPO member-run companies employ more than 15 million people and generate USD6 trillion in annual revenues.

Leadership. Learning. Lifelong.