A panoramic view of Riyadh's skyline. — AFP file
Economic confidence in the Middle East saw a significant upswing in Q3 2024, reflecting optimism amidst global economic turbulence and regional hurdles. The recent Global Economic Conditions Survey (GECS) from the Association of Chartered Certified Accountants (ACCA) and the Institute of Management Accountants (IMA) reveals notable enhancements in the region's capital expenditure and employment indices, both of which have surged well beyond their historical norms. This positive trend highlights the strong performance of non-oil economies in pivotal nations like Saudi Arabia, even as oil prices dipped since the Q2 survey. These findings underscore the region's resilience, signaling a move towards diversified growth and enhanced economic stability.
Although the New Orders Index experienced a slight dip, it still remains above the average, indicating sustained robust demand and investment across various sectors. Notably, these positive outcomes were recorded against a backdrop of heightened uncertainty, with geopolitical shifts and fluctuating global oil prices posing substantial challenges. Kush Ahuja, Head of ACCA Middle East, commented: “The encouraging results likely mirror the sustained resilience of non-oil economies in key countries like Saudi Arabia, coupled with rising anticipation of more lenient US monetary policies, given that many regional currencies are pegged to the US dollar. Compared to Q2, survey participants also displayed greater optimism about potential hikes in government spending over the next year.”
The survey conveys a growing belief that strategic economic strategies and investments in the Middle East are effectively fortifying the region's economic and financial stability, positioning many economies for sustained growth. Despite a volatile global environment, the survey implies that the Middle East is well-equipped to manage these challenges. ACCA's Chief Economist Jonathan Ashworth noted: “The Middle East's Q3 performance is heartening, particularly given the current geopolitical landscape. The region's emphasis on non-oil growth is expected to continue propelling this positive trend. Additionally, GDP growth in the region is projected to gain momentum in 2025 as oil production increases.”
Confidence in North America improved, albeit recovering less than half of its prior decline. In stark contrast, confidence in the Asia Pacific region notably waned. The ongoing weakness of the Chinese economy likely dampened sentiment. Confidence also significantly dropped in Western Europe, largely due to a sharp decline in UK confidence, fueled by concerns over impending tax hikes in the upcoming Budget. Globally, confidence experienced a moderate decline. The proportion of respondents reporting elevated operating costs remains historically high across most regions, suggesting that central banks must tread cautiously with monetary easing, especially given ongoing geopolitical developments. On a brighter note, the percentage of global respondents facing difficulties in accessing finance decreased further due to central bank policy easing.
“The global economy has shown considerable resilience so far in 2024, but the latest survey of accountants indicates some easing in growth at this point,” Ashworth added. Alain Mulder, Senior Director of Europe Operations & Global Special Projects at IMA, stated: “While the rise in confidence in North America is positive, the key indicators suggest a potential slowdown in the US economy and significant caution among businesses. However, with the job market demonstrating resilience and the Federal Reserve initiating its rate-cutting cycle, the most probable scenario for the US economy remains a soft landing.”
“On a positive note, increased policy stimulus is expected to bolster the Chinese economy, and the shift towards rate cuts by the US Federal Reserve, along with many other central banks, will progressively support global activity. That said, geopolitical risks remain extremely high, and significant uncertainty surrounding the upcoming US election could heighten corporate caution. Ultimately, businesses are currently navigating a world of heightened uncertainty,” Ashworth concluded.
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