Saudi Arabia Business Optimism Index – Q3 2010 Presented by Dun & Bradstreet South Asia Middle East Ltd. (D&B) National Commercial Bank (NCB)

Saudi Arabia Business Optimism Index – Q3 2010

Presented by Presented by Dun & Bradstreet South Asia Middle East Ltd. (D&B)Dun & Bradstreet South Asia Middle East Ltd. (D&B)National Commercial Bank (NCB)National Commercial Bank (NCB)

• 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

Survey

• Sample of business units representing Saudi Arabia’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

Composite Business Optimism Index

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

• To provide further analysis of the non hydrocarbon sector Composite Indices are calculated for each of the five economic subsectors

World Economic Outlook

Real GDP Growth Global composite manufacturing & services PMI

Source: JP Morgan and markit economics

• 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 figures are actuals

Economy of Saudi Arabia

• Saudi Arabia’s growth for 2010 is projected at 3.7% (0.1% in 2009); led by government spending amid high oil revenues

• After witnessing a drop in 2009, SAMA’s foreign assets are forecast to grow

Source: IMF Source: IMF

Composite Business Optimism Indices

• Non hydrocarbon sector outlook declines amid weak Selling Price and Sales Volume expectations

• Hydrocarbon sector outlook improves on expectations of higher Selling Price

Hydrocarbon sectorNon-hydrocarbon sector

Business Optimism Indices Trends : Non Hydrocarbon Sector

Manufacturing Sector

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

twelve consecutive months

• Saudi manufacturing sector optimism declines on weak selling price outlook

• Demand levels are expected to remain unchanged as compared to last quarter

Global Manufacturing Purchasing Managers’ Index

Source: JP Morgan and markit economics

Construction Sector

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

evolving as emerging markets continue to drive global economic recovery

• Saudi’s construction sector optimism declines as BOI for Volume of Sales slides

42 points, New Orders outlook still remains robust

• Recent selloff in international commodities market has presumably taken BOI

for Selling Price down 27 points

Trade & hospitality Sector

• Retail sector growth in developed countries likely to remain slow whereas

emerging markets are expected to witness rising sales in 2010

• Outlook for Saudi trade & hospitality sector declines on weak Selling Price

outlook, BOI is down 33 points to 10

• BOI for Sales Volume and New Orders register only a marginal decline

Transport & Communications Sector

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

trade sector and increased passenger traffic

• Saudi transport & communications sector optimism declines on weak demand

outlook as BOI for Sales Volume and New Orders has fallen 27 and 13 points

respectively

Finance, Insurance, Real Estate & 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

• Saudi service sector optimism declines on a 20 point fall registered in BOI for

Sales Volume and a 22 point drop in New Orders parameter

Global Services Purchasing Managers’ Index

Source: JP Morgan and markit economics

Business Optimism Indices Trends : Hydrocarbon 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

• Saudi’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 dip in BOI for Level of Selling Prices for the hydrocarbon sector is validated

by the decline witnessed in oil prices during May

Other Key Highlights

•Raw material costs is the leading concern for non hydrocarbon segment, 44% of the respondents have cited it as a factor which might affect their business •Availability of finance is a concern for 32% of the business units in non hydrocarbon sector

•40% of companies in the non hydrocarbon sector intend to investment in business expansion

•For 44% 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 mixed in Saudi Arabia amid concerns of anemic global economic recovery

• Non hydrocarbon sector optimism drops on lower BOI for Sales Volume and Selling Price

• The Manufacturing sector, in contrast to the other 4 non-hydrocarbon sectors, expects demand to stay robust as the BOI for both Sales Volume and New Orders remain relatively unchanged

• Hydrocarbon sector displays surge in optimism levels on the back of expectations of rise in level of Selling Prices

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