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It’s the world, but not as we know it

We saw an overwhelming positivity from our Middle East CEOs with regards to global economic growth. 52% of respondents in the region said the global economy is set to ‘improve’, compared to just 26% last year. Whilst this is a steep increase, and shows optimism from our CEOs, this places the region on par with the global average.

However companies were less bullish about their own future revenue growth prospects. 81% of respondents were ‘confident’ that their company would grow over the next 12 months, down from 88% last year. This figure is also downbeat compared to this year’s global average (88%). What we can see is that, this lack of confidence resonates into plans for cost reduction and faltering expectations for organic growth, especially when compared to responses from the rest of the world.

How confident are you about your company’s prospects for revenue growth over the next 12 months and next 3 years?
Do you believe global economic growth will improve, stay the same, or decline over the next 12 months?

81% of respondents were ‘confident’ that their company would grow over the next 12 months

Still, in a burst of optimism towards the future, over half of Middle East respondents said they were looking at a ‘new strategic alliance or joint venture’, compared to 49% of respondents globally.

Taking all this together suggests that many businesses in the region have readjusted their expectations for the business based on a ‘new normal’ economic environment, where a more balanced oil price and lower regional economic growth has shaped a tempered and cautious business environment. Still, the fact that some businesses are considering JVs shows a willingness to expand into new markets or skillsets in an increasingly globalised and connected world.

When we look at the Global Top 10* geographic markets CEOs are turning to for growth, China takes the lead, followed by the US and India. These results are not surprising given the fact that the US is the world’s largest economy, China is a major buyer of regional commodities and India remains a close trading partner and ready supplier of skilled and unskilled labour to the Middle East.

According to the survey results, 85% of regional CEOs are mindful of the fact the world is moving towards ‘multiple economic models’, compared to just 60% of CEOs globally. This bias is likely borne of the region’s diversity of trading partners – CEOs are mindful of rapidly changing and divergent economic models in the many countries it deals with, from East to West.

Which of the following activities, if any, are you planning in the next 12 months in order to drive corporate growth or profitability?
Considering the following threats to your organisation growth prospects, how concerned are you about the following?

With recent diplomatic spats and regional tensions, there was a slight increase in the number of bosses who are concerned with geopolitical uncertainty (92%), compared with last year (90%). The region’s CEOs are also increasingly concerned about ‘tax burdens’, as the UAE and Saudi Arabia introduced 5% VAT for first time in January this year. 85% of CEOs were concerned about tax, compared to 74% the year before. What’s more, the region has seen ‘stealth taxes’ emerge through different channels as local governments steadily shave away subsidies as part of their economic reformation strategies.

CEOs cited cyber crime as a major concern on the back of a slew of regional high-profile malware and viruses in the last few years. 77% of CEOs said they feared cyber threats compared to 66% last year. What’s more, 71% of CEOs said they feared ‘rising benefits and pension costs’ as regional states are now carrying less of the financial burden for private employees.

Despite the deep rooted threats that world connectivity brings, ‘globalisation’ remains a bright spot for Middle East leaders. Regional CEOs are overwhelmingly positive about globalisation and the benefits it brings. 62% said globalisation ‘brings universal connectivity’, 52% said it ‘improves the ease of moving capital, people and goods’ and 25% said it ‘improves universal access to basic infrastructure and services’. The Middle East had the highest response rate for ‘universal connectivity’ globally; this view is shaped in part by the region’s strategic location at the centre of the world and the success of its dynamic transportation companies.

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Hani Ashkar

Hani Ashkar

Middle East Senior Partner, PwC Middle East

Stephen Anderson

Stephen Anderson

Clients and Markets Leader, PwC Middle East

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