Index of confidence in the business climate in Abu Dhabi scores 59 points, reflecting continuous positive view among businesses

The records set by the general index of confidence in the business climate and its sub-indexes in 2015 has shown a continuous positive outlook amongst various businesses towards the economic conditions in the Emirate of Abu Dhabi and optimism for the future in spite of s slight decline of the general index value which reached 59 points in 2015 against 62 points recorded in 2014.

The new result of the general index of confidence came as part of the developmental indexes of the Economic Performance Report in the Emirate of Abu Dhabi 2015, released by the Studies Division of the Department of Economic Development – Abu Dhabi (ADDED) based on surveys conducted by the Statistics Center – Abu Dhabi.

Commenting on the index, Khalifa Bin Salem Al Mansoori, ADDED Acting Undersecretary, said that the business community’s evaluation of the economic conditions in 2015 came positive in general as the current conditions index recorded about 54 points on average for that year.

He stated that as per economic activity, the index of confidence in the business climate for 2015 reflects a maintained positive attitude and a feeling of optimism by the economic establishments in various sectors (industry, commerce, service and construction) in 2015, though to a lesser degree compared to the results of 2014. The highest degree of optimism was demonstrated in the service sector establishments where the index scored about 62 points, followed by the commercial activity and the industrial activity, with 61 points each while the construction activity scores about 57 points on the index.

Al Mansoori noted that the decline in the current conditions index compared to its level of 56 points on average in 2014 reflects a decline in the economic establishments’ evaluation of the current conditions during 2015 under the influence of some challenges.

According to the index survey and statements of respondents, he noted, the key factors that have their effects on the evaluation of business establishments of the current conditions include the hiking prices of production inputs, inflation rate and the decline in sales size and profit levels. In this regard, the data of the Statistics Center – Abu Dhabi (SCAD) indicate that the consumer price index (CPI) has increased from about 102.4 points in January 2015 to some 106.4 points in December of the same year.

He added that the concerns over the above mentioned factors, coupled with those connected to global economic developments, have contributed to limit the levels of optimism amongst economic establishments in 2015 compared to the previous year. The future conditions index went down to about 62 points on average in 2015 from its level of 65 points recorded in 2014.

On his part, Mr. Rashid Ali Al Zaabi, ADDED’s Executive Director of the Planning and Statistics Sector, said that the index results show that the service sector came first in terms of the current conditions index which reflects establishments evaluation of the conditions in 2015, in addition to the future conditions index which is about the level of optimism towards future expectations.

He contributed this positive evaluation by the service activity to the support it receives from its key sectors. In the tourism sector, as per the statistics of Abu Dhabi Tourism and Culture Authority (TCA Abu Dhabi), hotel occupancy in the emirate has hiked by 18% in 2015 compared to 2014 as hotels received more than 4.1 million guests.

Al Zaabi noted that the statistics issued by TCA Abu Dhabi have shown that hotels guests have spent 12.2 million night in hotels in 2015, with a 17% increase from last year. The overall revenues of hotels have also increased by 5% in 2015, to reach AED 6.6 billion compared with 2014.

In the banking sector, Mr. Al Zaabi added, released results indicate that the aggregate profits of Abu Dhabi’s five banks listed in Abu Dhabi Securities Exchange (ADX) have reached AED 19.97 billion in 2015, with an increase of 3.5 percent compared to their profits in 2014. The real estate sectors have also seen relative stability in market performance in 2015 as the rent of residential units have reached rewarding levels for investors.

In the trade sector, Al Zaabi said that the data of the Statistics Center – Abu Dhabi indicate a remarkable hike in the value of non-oil goods exports of the Emirate of Abu Dhabi in 2015, to reach about AED 31 billion in that year, with an increase percentage of 63.7% compared to 2014.

According to Mr. Al Zaabi, this was coupled with the increase of imports value by 10.9% to AED 119.7 billion to contribute to the overall rise in the value of non-oil goods foreign trade by 11.3% or AED 169.5 billion in 2015, noting that re-exportations have declined by 26.1% to reach AED 18.7 billion in 2015.

According to the general index of confidence in the business climate in the Emirate of Abu Dhabi in 2015, if we go by the size of establishment, results will reflect maintained optimism amides the various businesses of Abu Dhabi (big, medium and small) in 2015, though this optimism was less than its 2014 level.

The index indicated that the levels of optimism were higher in the big establishments than their medium and small counterparts. The general index scored about 60 points for big establishments against 59 points and 56 points for medium and small establishments respectively. This comes at a time when big establishments enjoy a greater ability to market their products in addition to their financial capabilities which allows it to expand and improve wages in comparison with medium and small businesses.

The results show that based on the levels recorded for the current conditions index, the evaluation of current conditions by small establishments, which came negative most of the time in 2015, was influenced by several challenges facing these establishments in terms of balancing between operational costs and revenues at a time when production requirements and rents are increasing on the one hand and sales and prices are going down on the other, which is limiting small business ability to expand.

While the majority of businesses indicated that there were no obstacles affecting their work in 2015, the survey of the general index of confidence in the business climate conducted in the 4th quarter of that year show that some establishments, in the three regions of the emirate, have mentioned some factors affecting their activity, mainly the rents, electricity, the prices of raw materials, water and transportation respectively.

Other factors quoted as obstacles included inflation, securing a land, illegal competition, financing costs and others. However, the high rents came first in terms of its strong impact on the activities of all businesses across the board.

Source:WAM