Economic confidence amongst CEOs in the Middle East and North Africa (Mena) has continued to decline in the first quarter of this year, according to a survey carried out by YPO, a network of global business leaders and chief executives.

The YPO Global Pulse Confidence Index for the Mena region decreased for the sixth consecutive quarter, falling to 55.6, trailing the global confidence composite score of 58.3. Only once before in the seven-year history of the quarterly survey has confidence amongst business leaders in the region dropped to this level, which was during the fourth quarter of 2011 at the height of the global economic crisis.

Saudi Arabia, which experienced a dramatic loss of confidence in the second half of 2015, bounced back significantly in the first quarter of the year, climbing 14.1 points to 53.5, although a full 15 points below the confidence level 18 months ago.

Confidence in the United Arab Emirates remained gloomy after a sixth successive quarterly decline, slipping 0.9 point to 49.4. Lebanon experienced a sharp decline in optimism, falling 7.2 points to 46.4, reflecting a pessimistic economic outlook.

In contrast, Egypt enjoyed a modest increase of 1.7 points to 59.2, and Israel remained firmly in optimistic territory at 62.3, almost unchanged from the previous quarter.

“There is little surprise that business leaders in the region continue to show concern about the economic challenges affecting many countries,” said Bassel Hamwi, IFC head for Mena, and member of YPO Levant Chapter.

“With a combination of slow global economic recovery, cheap oil and regional instability, economic confidence in Mena is unlikely to improve in the short-term. CEOs are likely to remain cautious throughout 2016, closely watching global economic indicators for signs of improvement and opportunity,” he added.

Taken as a whole, the GCC sub-region of Mena, reported an increase of 6.3 points in confidence, on the back of an alarming slump in confidence in the previous 18 months. Confidence amongst GCC countries climbed 6.3 points from the final quarter in 2015 to 52.2, thanks to improved outlooks in Kuwait, Oman, Qatar and Saudi Arabia. This is still a full 18 points below its October 2014 level, before oil prices began to slump, but it does suggest that the worst is now over.

The YPO Global Pulse Sales Index for the Middle East and North Africa fell 2.7 points to 61.1. More than half of CEOs (55 per cent) still expected to grow revenues in the next 12 months, compared to only 19 per cent who predicted that sales would contract, and 26 per cent who expected turnover to remain at the same level.

The Employment Index for the region slipped 2.0 points to 55.8. Almost a third (31 per cent) of business leaders expected to increase headcount in the next year, versus only 13 per cent who expected the size of their workforce to shrink. The majority of CEOs (56 per cent) said that their headcount was likely to stay at the same level.

The Fixed Investment Index for Mena dropped 1.7 points to 58.2 in the first three months of the year. 40 per cent of CEOs expected to increase fixed investment in the year ahead, and 41 per cent expected investment levels to remain unchanged. Only 19 per cent forecasted a decrease in fixed investment in the next 12 months.

Key findings for Mena

- Economic conditions expected to remain tough: When considering the short-term outlook, more than a third (34 per cent) of CEOs expected business and economic conditions to deteriorate over the next six months, with 35 per cent anticipating little or no change. Only 31 per cent predicted an improvement in the economic climate.

- Fall in optimism across sales, hiring and fixed investment: Whilst all three component parts of the YPO Global Pulse Index (tracking sales, employment and fixed investment) dropped in the first quarter of 2016, CEOs in the Mena region remained relatively optimistic about the prospects for their own organisations in 2016. 

• –TradeArabia News Service