Nine in 10 regional CEOs concerned about uncertainty but majority remain positive on prospects

Nine in 10 Middle East business leaders are worried about geopolitical uncertainty, up from 83 per cent in 2019 and higher than the global average of 72 per cent, with the majority of executives looking to make operational efficiencies over the next 12 months to boost performance, a new survey from global consultancy PwC found. Ninety per cent of chief executives in the Middle East are concerned about the external challenges their companies face, according to the PwC Middle East Survey 2020. Despite the uncertainty, however, 47 per cent expect their companies to enter new markets in 2020 with company heads particularly energised by opportunities in Saudi Arabia and Egypt, the study, released on Sunday, found. Two thirds are also confident about their company’s revenue growth in the next year and almost three quarters are more confident about the next three years. “Uncertainty can be a segue for reduced headcount, decreased investment and overall timidness when it comes to growth opportunities,” said Hani Ashkar Middle East Senior Partner PwC Middle East. “But CEOs in the Middle East do not shy away, looking instead to adapt to create sustainability and growth for the future.” Last month the International Monetary Fund revised its global economy growth estimate, its sixth downward estimate in over a year. The Washington-lender projects global growth to increase modestly by 3.3 per cent in 2020 and 3.4 per cent in 2021, a downward revision of 0.1 per cent and 0.2 per cent respectively. Despite trade war tensions easing between the US and China last month, following the signing of the phase one deal, geopolitical tensions between Iran and Iraq over the US killing of a top Iranian military commander and growing concern over the effects of the deadly coronavirus have added to the uncertainty climate. GCC governments, however, have shifted focus from austerity on the back of a three-year oil slump that began in 2014 to spending with Abu Dhabi rolling out its Ghadan 21 initiative in September 2018, a Dh50bn stimulus package to boost non-oil economic growth in the emirate, and Dubai unveiling a record expansionary budget for 2020 to help complete projects linked to Expo 2020. To adjust to the lower global growth environment, chief executives are focusing on operational efficiencies to enable long-term, sustainable and profitable growth when the outlook improves, the report found. Seventy-seven per cent of Middle East chief executives plan to make operational efficiencies over the next 12 months to improve performance, up from 68 per cent last year, according to PwC. However, only 23 per cent of regional company heads expect to cut staffing levels this year compared with 43 per cent in 2019, and 47 per cent intend to hire more employees in the next 12 months. “This nuanced picture suggests that for many of our CEOs, the drive for efficiency is as much about getting in shape to seize future opportunities as surviving current difficult market conditions. Sustainability is the focus not rash cost cutting,” the PwC report noted. One urgent requirement is the need to upskill with 80 per cent of those polled citing a skills shortage in the workforce as a potential barrier to growth prospects. Seven in 10 said they are looking to maximise their existing staff through tech upskilling programmes that factor in the digitalisation of business systems and consumer markets. While increased digitalisation through the leverage of big data, artificial intelligence, robotics and the Internet of Things is a positive, new technologies can come with risks. “The private sector’s implementation of these innovations is outpacing the development of regulatory systems and standards to mitigate their risks<" Mr Akshar said. "However, if those boundaries are drawn too tightly, they inhibit cross-border data flows, the effectiveness of cybersecurity and, simply put, investment and innovation”. To boost growth further, 47 per cent of regional business heads expect to enter a new market in 2020, a notably higher figure than the global average of 35 per cent. Saudi Arabia, the Arab World's largest economy, ranked first as the most important growth market, followed by Egypt, the US and China. Saudi Arabia is implementing a number of measures as part of its economic diversification plans under the Vision 2030 initiative to reduce the country’s reliance on oil, create more jobs for its citizens and diversify sources of income. “Over the coming year, Middle East business leaders will hope that continuing geopolitical tensions do not puncture fragile investor confidence," the PwC report noted. "In this regard, Saudi Aramco’s successful $25.6 billion IPO in December — the world’s largest — ushered in the new decade on an encouraging note.”

Nine in 10 regional CEOs concerned about uncertainty but majority remain positive on prospects

Almost half expect their companies to enter new markets, such as Saudi Arabia and Egypt, to seek growth opportunities