Political tensions in the Arab world, the recent earthquake and the resultant tsunami in Japan besides concerns over European sovereign debt have weakened the optimism in the Qatar Inc in the second quarter, according to the Business Optimism Index (BOI).

The composite index for the hydrocarbon sector retreated due to the expected fall in net profits and employment and that for the non-hydrocarbon segment declined mainly due to a pulldown by uncertainty in the region, said the BOI, a joint product of Qatar Financial Centre Authority (QFCA) and Dun and Bradstreet (D&B).

The report was released yesterday by Yousef al-Jaida, head of asset management and banking, QFCA.

“It comes as no surprise to see the optimism level of businesses in Qatar decline in this Q2,” Phil Strange, chief financial officer of D&B South Asia Middle East said, referring to the political unrest in several Middle Eastern countries, the unfolding of the terrible events in Japan and continued to Eurozone sovereign debt worries.

He said the fall in the hydrocarbon sector was “little surprising”, given the fact that fears owing to Middle East tension is driving the oil price so strongly upwards.

Although the non-hydrocarbon sector index dropped, he said, it was still showing strong optimism and remains more optimistic than any of the 2010 readings; demonstrating resilience in the face of negative regional and global factors.

In the non-hydrocarbon sector, optimism has been declining in terms of sales volume, net profits, new orders, number of employees and level of stocks; even as it marginally improved in the case of selling prices because of inflationary pressures on the economy, the report noted.

Inflation in Qatar, according to BOI, is showing an upward trend as rents stabilise due to a gradual narrowing of the current excess capacity in real estate and non-rent inflation has been inching up due to the rise in food prices and the recovery in international commodity prices.

In the hydrocarbon segment, the survey found 60% of the respondents have predicted that prices would remain at current levels in Q2 2011, while 25% expect prices to go up and 15% expect a fall. The BOI for Level of Selling Prices stands at 10, which is 15 points lower than the score in the previous quarter.

“This is because prices are expected to remain at current levels with a possible increase if the situation in the Middle East worsens,” it said.

In so far as the non-hydrocarbon segment is concerned, the outlook for Qatar’s manufacturing sector dropped but higher than 2010 levels; while the outlook for the construction sector is still strong but lower than the first quarter of this year.

Weakened optimism was visible in trade and the hospitality sector as well as in transport and communications sectors with air freight being impacted by Japan disaster and rising fuel costs as well as Middle Eastern uncertainty. Similarly, declining optimism was seen in Qatar’s finance, real estate and business services sector.

 Read the article in Gulf Times