Business sentiment in Kuwait will improve in the coming quarter with hydrocarbon sectors recording a Business Optimism Index (BOI) of 46 and the non-hydrocarbon sector at 54, disclosed financial experts. Speaking at a press conference at the JW Marriott in Kuwait City yesterday, Phil Strange, Dun and Bradstreet South Asia Middle East Limited's (D & B) Chief Financial Officer, noted that non-hydrocarbon BOI is at its highest level since their reporting began in Q3 of 2009. He said that such an indicator is a clear suggestion that the impact of the global financial recession is now receding.
Increased demand stimulated by private and public sector spending and robust oil price bodes well for the Kuwaiti economy," Strange added. The D & B Q1 2011 report was presented with local media providing their results from all concerned sectors. The Dubai based financial and credit rating firm stressed that the non-hydrocarbon sector in Kuwait has seen a considerable improvement in optimism in Q1 2011. "The composite BOI for the non-hydrocarbon sector has gained 15 points in Q1 2011 compared to Q4 2010, he said.
The financial firm surveyed the top 500 companies in Kuwait to come up with the most vivid and accurate results. D & B asked companies about their sales volume and revenue, net profit, level of stocks and employment. Factors impacting businesses in Q1 continue to be similar to those in the previous quarter, according to Strange. Raw material cost and availability of finances are identified as the two major factors impacting business operations in Q1 2011.
The good thing about Kuwait, even in the face of global recession, is that the economy will always be in good shape because of oil revenues. They have huge budget surplus, especially when the price of oil is at its peak. They can stimulate the economy at any given time even in a global recession. Kuwait's multi-billion dollar development plan is buoying the financial optimism of the country," Strange explained.
Kuwait posted a budget surplus of KD 6 billion in the opening months of the fiscal year ending March 2010. IMF projected Kuwait's economy to expand at 4.4 percent in 2011 from a 2.3 percent growth in 2010. When asked whether the political situation in the Arab world has somehow affected the projected Q1 report, Ahmad Abu Blan, D and B's Business Development Manager said, "No, the survey took place just before the Tunisian regime was overthrown [in December 2010]. At that time Egypt was silent. So, people here believe it was an isolated case but surely the second quarter will somehow reveal something. It's an exciting report to deal with.
According to the report the level of optimism in the manufacturing sector is up 17 points to 50 in Q1 2011. In the construction sector meanwhile, the positive outlooks towards sales, profitability and employment have lifted the overall optimism for Q1 2011 five points higher to 51.
The D and B report also revealed that the biggest rebound was in the international transportation and logistics sector and that Middle Eastern carriers have recorded the largest capacity expansion at 13.7 percent in October 2010 compared to the same period the previous year. "The sector holds the most optimistic outlook amongst all sectors despite a slight moderation in the sales and new order and parameters," the report read.
Even finance and real estate businesses in the country have registered a very optimistic response according to the D & B. "The sector has witnessed a steep recovery in optimism levels for sales and selling price parameter in Q1 2011. The volume of sales has gained 42 points to 69 while that for the level of selling prices parameters has gained 40 points to 45 for Q1 from the previous quarter," the report stressed.
The composite index for the non-oil sector has surged to 61 in Q1 2011; influenced by improved demand forecasts, it said, adding the non-hydrocarbon sector witnessed "significant" gains in momentum with the construction sector leading those gains.
Highlighting that in Q4 2010 survey respondents were somewhat ?cautious? owing to the uncertain global recovery with the US engaging in quantitative easing, the eurozone debt crisis boiling and a currency war threatening, it however said ?buoyancy in oil prices in the last quarter in conjunction with strong domestic growth has brought about a surge in sales and profits optimism in the New Year."
The strength of business optimism in these key areas is also driving expectations for new orders and employment as firms anticipate an improvement in order books and take on new staff to meet the expected demand, according to the BOI.
"Inflation is expected to remain subdued as rents, which carry the maximum weight in the consumer price index basket, are expected to remain low," it said.
About the factors impeding business, the BOI found that raw material costs continue to be the top concern for non-hydrocarbon firms in Q1 2011 with 43% of the respondents having cited it as the leading concern.
Availability of skilled labour is the second most important factor for respondents with 23% citing it accordingly. Availability of finance is the biggest concern for 20% of the respondents while property prices are the largest factor impacting business for 14% of respondents, according to the survey.
In the oil and gas segment, project delays are the chief factor impacting business while finding skilled labour is also an important issue.
Read the article in Kuwait Times