While 65 per cent of businesses in the Gulf are forecasting revenue growth of five per cent or higher in 2016, a third of those are particularly bullish with forecasts of 15 per cent growth despite the drop in oil prices and global economic uncertainty, a report said.

A further 30 per cent of businesses are expecting 2016 to look much like 2015 in terms of revenue with just five per cent of businesses forecasting a reduction of more than five per cent, according to the report released today (February 22) by Korn Ferry, the preeminent global people and organizational advisory firm.

Harish Bhatia, Korn Ferry Hay Group’s regional manager for productized services said: “The GCC economies are experiencing some common global and regional forces impacting individual businesses across industries. However overall, we are still a growth focused region where all six countries are forecasting growth, albeit at a slower rate than in previous years – due primarily to the price of oil.”

“The current climate is prompting business leaders to focus on different priorities in 2016 with managing costs and improving profitability at the top of the list,” said Bhatia.

The report is based upon data gathered during Korn Ferry Hay Group’s seventh annual Business Outlook Study which surveys the performance and sentiment of over 700 organizations across a variety of sectors in the GCC countries of UAE, Saudi Arabia, Qatar, Kuwait, Oman and Bahrain.

The year that was – performance in 2015

Over 50 per cent of businesses surveyed achieved their targets in 2015 with a further 16 per cent exceeding their expectations for the year.

“It’s impressive to see that two-thirds of businesses achieved, or exceeded their targets last year. The data demonstrates that although the oil price has severely impacted a few oil-related industries, the private sector economy in the Gulf region has had a relatively successful year,” said Bhatia.

Approximately 75 per cent of those surveyed, although only 66 per cent of those in oil and gas, paid annual bonuses to employees for 2015. However many organizations are now utilizing their variable limited bonus pool for the high performers selectively.

The year ahead – forecasts for 2016

Two-thirds of businesses are forecasting revenue growth in 2016 and a further 30 per cent are expecting to stay within five per cent (either above or below) their current revenue into 2016.

Bhatia explained: “Oil prices have been hit hard in 2015 and we aren’t expecting much recovery in the short- to medium-term. Economic growth rates have slowed down in response, however growth hasn’t stopped altogether and aside from some specific oil related industries and the financial services sector, there are still fantastic growth opportunities in the GCC.”

“Coupled with an increased focus on managing costs (28 per cent in 2016, nine per cent in 2015) and on improving profitability (22 per cent in 2016, 17 per cent in 2015), it is reasonable to expect that businesses forecasting growth will be able to achieve it - although perhaps more slowly than originally planned. Cost reduction initiatives can help businesses become more efficient, particularly after several years of constant growth so it’s good to see so many businesses focusing in this area,” Bhatia added.

The report indicates that one-third of businesses are planning to increase their total workforce in 2016. Contrary to recent market sentiment, 71 per cent are planning to increase salaries or allowances in the range of four to six per cent – primarily for high performing staff. In some industries, such as FMCG, this as high as 90 per cent of the organisations.

For the 15 per cent of businesses that are reducing their workforce, the support services will be the primary focus – due primarily to the overriding focus on cost management and efficiency.

A national perspective

“Governments in the GCC are also focused on managing costs with some reduction in spending and cancellation of subsidises. However, they are also maintaining active plans for economic growth and GDP growth forecasts range from 2.5 to 4.5 per cent – a good sign for those in the private sector,” said Bhatia.

United Arab Emirates

Almost one-third of UAE businesses did not achieve their targets in 2015; however, the outlook for 2016 is positive with just five per cent of businesses in the Emirates predicting a decrease. Despite some downsizing in 2015 – especially in banking and financial services, just 14 per cent of businesses have indicated that they intend to decrease the size of their workforce in 2016.

As the GCC’s most diversified economy, and the least reliant on oil, the UAE is well placed to grow in 2016.

Saudi Arabia

Businesses in Saudi Arabia struggled the most in 2015 with 43 per cent failing to meet their revenue targets. Rising political tensions and security fears alongside falling oil prices and unstable local markets.

However, the report shows that businesses are confident the worst is behind them – 77 per cent of businesses are predicting revenue growth above five per cent.

Qatar

Qatar achieved good results in 2015 with 84 per cent of businesses either achieving, or exceeding their targets. Korn Ferry Hay Group expects a continuation of this success into 2016 as major infrastructure, health and education initiatives continue in the country.

Kuwait

Almost one-third of businesses in Kuwait failed to meet their targeted budget in 2015 with none reporting that they had exceeded their annual targets. However, the report indicates some return of confidence as 86 per cent of participating businesses expecting to grow by more than five per cent this year.

Bahrain

Bahrain performed in line with regional averages in 2015 and the data indicates that they will do the same in 2016 – 69 per cent of businesses expect to grow by more than five per cent. However, a higher proportion of businesses than the regional average expect to reduce their workforce in 2016.

Oman

Similarly to in Bahrain, businesses in Oman have performed in line with regional averages and are expected to do so again in 2016. In good news for employees in the Sultanate, fewer than average businesses are expecting to reduce their overall workforce (13 per cent) and many more are looking to hire new staff (33 per cent) in 2016, according to the Korn Ferry Hay Group report. – TradeArabia News Service