Qatar Business Optimism Index Q3 2010

Presented by Presented by Dun & BradstreetDun & BradstreetQatar Financial Centre (QFC) Authority Qatar Financial Centre (QFC) Authority

• The D&B Business Optimism Index is recognized world over as an

indicator which ascertains the pulse of the business community

• Provides insight into the short-term outlook of business units on

key business parameters including sales, profits, pricing,

headcount and investment

• Provides analysis of major trends and issues concerning the

business community

Business Optimism Index

• Sample of business units representing Qatar’s economy is selected

• 500 business owners and senior executives across business units are

surveyed

• The Q3 survey was conducted during June 2010

• Respondents are questioned about their expectations on relevant

business parameters

• Survey also captures respondent feedback on current business

conditions

Survey

Composite Business Optimism Index

• The Composite Index is calculated separately for the hydrocarbon and non hydrocarbon sectors

• Within the non hydrocarbon sector the index is calculated:

– for the six individual indices

– for the five sub sectors within

• For the hydrocarbon sector the Composite Index takes into account the aggregate behavior of the three individual indices

World Economic Outlook

• Global economy expected to grow 4.6% in 2010, up from April forecast of 4.2%

• The US economy registered growth of 2.7% in Q1 2010 as against a revised GDP

growth rate of 5.6% in Q4 2009. 2010 growth revised upward to 3.3%

• The global composite PMI showed expansion (i.e. scoring > 50) for the eleventh

consecutive month

Source: IMF forecast, Q1 2010 are actual figures Source: JPMorgan and Markit

Global composite manufacturing & services PMIReal GDP (%)

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

110,000

5,000

6,000

7,000

8,000

9,000

10,000

11,000

12,000

Q1 2009 Q2 2009 Q3 2009 Q4 2009

Manufacturing Construction

Trade, Restau & Hotels Finance, Ins, Real Est & Bus Ser

Transport & Comm Mining & quarrying (sec axis)

GDP at current prices (sec axis)

Economy of Qatar

• Qatar’s nominal GDP growth in Q4

2009 over the previous quarter was

9.7%; mining & quarrying sector grew

23.8%

• Real GDP growth is expected to surge

from 8.7% last year to 18.5% in 2010

• Higher oil & gas revenues will lead to

a surge in current account balance

from US$ 14 bn in 2009 to US$ 28 bn

in 2010

Quarterly GDP 2009 (QAR mn)

780

792

805

776

814 815821

750

760

770

780

790

800

810

820

830

Q309 Q409 Q110 2009 Mar-10 Apr-10 May-10

'00

0 b

pd

Crude oil production

Source: OPEC

Composite Business Optimism Indices

Non Hydrocarbon Sector Hydrocarbon Sector

• Business optimism in the non hydrocarbon sector lifted by improvement in all parameters

• Surge in hydrocarbon optimism mainly due to an increase in level of selling prices expectation

69 66

34

7

2128

24 27

39

0

10

20

30

40

50

60

70

80

Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10

95

70

-37

-6 -5

25 28

12

46

-40

-20

0

20

40

60

80

100

120

Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10

Business Optimism Indices Trend – Non Hydrocarbon Sector

7882

41

9

34

49

38 41

49

0

10

20

30

40

50

60

70

80

90

Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10

BO

I In

dex

Volume of Sales

76

63

40

19

37

24

3339

49

0

10

20

30

40

50

60

70

80

Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10B

OI I

ndex

New Orders

5952

8

-18

-4

51

7

19

-30

-20

-10

0

10

20

30

40

50

60

70

Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10

BO

I In

dex

Selling Prices

66

74

37

3

26

37

3027

46

0

10

20

30

40

50

60

70

80

Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10

BO

I In

dex

Net Profits

66

60

42

24

12

25

19 20

34

0

10

20

30

40

50

60

70

Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10

BO

I In

dex

Number of Employees

51

61

13

1

23

41

13

5

33

0

10

20

30

40

50

60

70

Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10

BO

I In

dex

Level of Stock

Manufacturing Sector

• The Global Manufacturing Purchasing Managers’ Index has shown growth for twelve

consecutive months

• Manufacturing sector BOI increase on the back of improvement in hiring outlook

• BOI for Sales Volume drops but for New Order increases, suggesting mixed

demand outlook in the third quarter

Global Manufacturing Purchasing Managers’ Index

Source: J P Morgan and market economics in association with ISM and IFPSM

Manufacturing Sector: Composite Index

Construction Sector

• The global construction sector is witnessing a gradual upturn; sector is evolving

as emerging markets continue to drive global recovery

• Strong demand expected in the construction sector as BOI for Volume of Sales

has jumped to 49 as against 26 in previous quarter

• The BOI for Level of Selling Prices has stayed stable, reflecting recent correction

in international commodities market

Construction sector: Composite Index

Trade & Hospitality Sector

• Retail sector growth in developed countries likely to remain slow whereas emerging markets are expected to

witness rising retail sales in 2010

• In Qatar, respondents are optimistic about the sector due to expectations of a huge increase in BOI for level

of selling prices which moved to 26 from -5 in Q2

• Demand levels are expected to improve modestly

Trade & Hospitality sector: Composite Index

23

13 1317

46

0

10

20

30

40

50

Q309 Q4 09 Q1 10 Q2 10 Q3 10

Ind

ex

Transportation & Communication Sector

• Global transportation sector showing strong signs of revival amid recovery in

trade sector and increased passenger traffic

• Qatar’s transport and communications sector has shown a substantial

improvement on the back of strengthening demand and better pricing outlook

Transport & Comm. Sector: Composite Index

21

32 31 33

42

0

10

20

30

40

50

Q309 Q4 09 Q1 10 Q2 10 Q3 10

Ind

ex

Finance and Business Services Sector

• The Global Services PMI for the month of May stands at 56.3, showing expansion for the eleventh

month in a row

• Qatar’s finance & business services sector optimism rises on the back of better Selling Price

outlook

• Demand is expected to see modest improvement in third quarter

Finance & Business Services sector: Composite IndexGlobal Services Purchasing Managers’ Index

Source: JPMorgan and Markit

-60

-40

-20

0

20

40

60

80

100

Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10

In

dex

Level of Selling Prices Net Profits New Employees

Oil & Gas sector

• Oil prices fell by 20% to USD 67 from their early May peak of USD 84 on concerns of

Euro Zone debt crisis, but have risen since then to average USD 73 in June

• Qatar’s hydrocarbon sector optimism has improved significantly in the third quarter

primarily due to a higher BOI score for level of selling prices

• Last quarter’s reading on BOI for Level of Selling Prices (-8) for the hydrocarbon

sector is validated by the decline witnessed in oil prices during May

Hydrocarbon Sector: Composite Index

Other Highlights

•Raw material costs is the leading concern for non hydrocarbon segment, 48% of the respondents have cited it as a factor which might affect their business •Availability of finance is a concern for 29% of the business units in non hydrocarbon sector

•31% of companies in the non hydrocarbon sector intend to investment in business expansion

•For 50% of the companies in the hydrocarbon sector project delays could be a major factor which might impact their business in the third quarter

Conclusion

• Business outlook improves in Qatar despite continuing debt troubles in Euro Zone

• All sub sectors show an improvement in sentiments buoyed by robust demand outlook

• Transport & logistics sector shows major improvement due to improved demand and consequently profitability outlook

• Hydrocarbon sector displays surge in optimism levels on the back of expectations of rise in level of selling prices

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