|13 February, 2020

Saudi CEOs are worried about global economy, but confident about local businesses

Business leaders more upbeat about country's growth prospects

Image used for illustrative purpose. The view of Riyadh horizon during a cloudy day.

Image used for illustrative purpose. The view of Riyadh horizon during a cloudy day.

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Business leaders in Saudi Arabia are increasingly worried about where the global economy is headed this year. However, they are more upbeat about the outlook of their own country, and  organisations, a new study found.

The latest KPMG survey released on Wednesday showed that the number of CEOs who are confident about the global economy has dropped from 67 percent in 2018 to 62 percent in 2019, indicating a decline in the level of confidence among corporate heads.

The study, however, found that the percentage of CEOs who are positive about the growth prospects of their own companies went up from 92 percent in 2018 to 98 percent in 2019, while the number of business leaders who are optimistic about their country’s outlook went up from 66 percent to 72 percent.

“The global economy has become more uncertain and fragile… It is understandable that confidence in the global economy has dropped with the CEOs. Domestically, on the other hand, the Saudi government continues its effort to implement [several reforms],” Dr. Hussain Abusaaq, chief economist and head of research at KPMG Saudi Arabia said in the report.

A series of events across the world have kept CEOs on guard, according to the auditing firm. Last year, there were trade tensions between the United States and China, tightening credit policies in the Asian state and loosening financial conditions in big economics.

In Saudi Arabia, however, several initiatives and mega projects have been unveiled as part of the country’s strategy to stimulate the economy and diversify its revenues away from oil. In 2019, the kingdom announced more than 60 development deals valued at more than $53 billion. The kingdom reportedly has plans to undertake various projects to improve the quality of life among its residents and create new jobs.

KPMG’s report is based on the inputs of 50 CEOs in Saudi Arabia in 2019 and assesses some of the important international trends impacting the country and how companies can chart new business strategies for success over the next three years.

“Overall, [CEOs were found] to be confident about their companies’ growth prospects, despite macro-economic headwinds and relatively lower confidence in the direction of the global economy,” the auditing firm said in a statement sent to Zawya.

According to IHS Markit’s report, business conditions in Saudi Arabia’s non-oil private sector were slightly subdued in December when compared to the previous month, but things were looking upbeat when compared to the previous year.

The Purchasing Managers’ Index (PMI) for Saudi Arabia slipped to 56.9 in December, from 58.3 in November.

“The latest Saudi Arabia PMI points to a short-term setback for the non-oil private sector, with the growth of business activity and new work slipping since November. However, the survey continues to indicate a much stronger improvement in business conditions than at the same time during 2018,” said Tim Moore, economics associate director at IHS Markit.

More on KPMG’s survey

To achieve growth and keep their organisations resilient, the majority of CEOs (68 percent) surveyed by KPMG believe that acting with agility is very important.

Most of them (68 percent) feel that they need to improve their innovation processes and execution over the next three years to stay relevant in the industry they operate in, while 54 percent agree that they must improve their understanding of their customers.

“We believe that in 2020, the ability to embed innovation in their businesses will set CEOs apart. Those who understand their customers and build agile organisations where employees can thrive, will build a competitive edge over their competitors,” KPMG said.

(Reporting by Cleofe Maceda; editing by Seban Scaria)

Cleofe.Maceda@refinitiv.com

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© ZAWYA 2020

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