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Most businesses in the UAE and the rest of the Middle east are more optimistic about recovery compared to their peers around the world and are now starting to slowly pick up from the downturn caused by the pandemic, according to the new HSBC Navigator report.
However, it might take about two years before profitability will go back to levels prior to the outbreak.
The survey, which included more than 10,368 firms in 39 markets worldwide, found that 90 percent of UAE respondents expect to return to pre-COVID profitability by the end of 2022, compared with 81 percent globally. A small portion, 18 percent, are betting on a return to 2019 profits by the end of this year.
Most firms (90 percent) also said they have a positive outlook over the next one to two years, higher than the global average of 72 percent, while less than a tenth (8 percent) have a negative outlook.
The pandemic has left many businesses worldwide struggling to survive, with those in the air travel, hospitality and non-essential retail among those badly hit. In a survey conducted in April, the Dubai Chamber of Commerce found that 70 percent of firms in Dubai expect to shut down within the next six months.
Improvement, optimism
Daniel Howlett, HSBC’s regional head of commercial banking for the Middle East, North Africa and Turkey (MENAT), said their latest findings indicate that despite 2020 being a challenging year, firms in the UAE and in other markets in the region are more optimistic than their global counterparts.
The higher level of confidence, he said, is partly driven by the UAE government’s diversification strategy, as well as the recent regulatory changes on foreign ownership, relaxation on visas and legal reforms that cover alcohol consumption, divorce, inheritance and wills.
The UAE has also demonstrated that it’s one of the safest destinations in the world for COVID-19, as seen from the high level of virus screening per capita, while foreign direct investments (FDI) continue to flow into the country.
“And let’s not forget that we have a [World Expo] to come in the UAE, towards the end of next year, and I remain optimistic that the will be an important event not just for the UAE, but for the wider region,” Howlett added.
As a result, he said, businesses are slowly recovering to pre-COVID levels. “Businesses in the Middle East have continued to be agile and adaptable to the new environment and are very focused on delivering growth both in the short and in the medium term,” Howlett said during a media briefing on Sunday.
During the last few months, Howlett, said the UAE alone has seen an improvement in activity, particularly in the areas of international and intra-regional trade with markets like Saudi Arabia and China. Across different sectors, there’s been a growth in telemedicine, food and water security, as well as infrastructure, among others.
Invest more
The HSBC Navigator report also showed that businesses in the UAE recognise the need to invest for future growth, with 81 percent of respondents saying they intend to increase their investment in their business next year, compared to 67 percent globally.
The companies are likely to focus their investment on marketing, product and process innovation and customer experience.
More than 85 percent of companies in the UAE have also set targets for a broad range of aspects of environmental, social and governance issues and more than four-fifths are measuring environmental and social aspects of sustainability.
Almost all companies in the UAE (99 percent) see multiple opportunities from improving their environmental and ethical sustainability, the three most important being increased customer demand, attracting investment and promoting employee wellbeing.
(Reporting by Cleofe Maceda; editing by Seban Scaria)
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