Monday 25, June 2018 by Jessica Combes

Economic optimism across ME to boost business spending and investment prevails

 

Middle East finance executives report great confidence in economic growth prospects for the year ahead, finds the 2018 Global Business & Spending Outlook, a survey by American Express Middle East

The clear majority of respondents—more than 90 per cent—anticipate modest to substantial economic expansion in their country, closely aligned with the worldwide trend (85 per cent). 

This optimistic climate signals readiness for businesses to shift into growth mode. Three quarters of the region’s finance executives (74 per cent) plan to increase spending and investment levels by 6 per cent or more. The five countries with the Highest Investment Growth in the world are China (90 per cent), followed by Japan (87 per cent), then UAE (84 per cent), KSA (83 per cent) while Russia (80 per cent) completed the top five. Nearly the same proportion (73 per cent) plan for moderate spending and investment in search of top-line growth while improving profitability. 

The cross-industry findings in the joint American Express and Institutional Investor study are based on a survey of 870 CFOs and other senior finance executives at companies with annual revenues of $500 million or more from more than 21 countries worldwide.  And to add to its holistic view of a dynamic global services economy, for the first time in its 11-year history, the study includes respondents from the Middle East region representing 17 per cent of the sample, compared to 18 per cent from North America, 11 per cent from Latin America, 32 per cent from Europe, and 21 per cent from Asia Pacific.

“Financial leaders are less anxious about economic surprises and have a well-directed view on how to drive business growth,” said Saud Swar, VP Commercial Business & Head of UAE, American Express Middle East. “This prevailing optimism is tempered with smart strategies as we’re seeing spend directed to specific growth initiatives such as meeting customers’ evolving needs and emerging technologies that support the need to innovate.” 

In line with executives prevailing confidence, findings from the study suggest that economic, political, social and environmental uncertainty has become the new normal. Almost three quarters (73 per cent) say that their spending and investment plans are not impacted by domestic or economic risk.   

This, however, hasn’t stopped finance executives from keeping a watchful eye on business performance; 77 per cent of respondents indicate a growing interest in expanding enterprise-level risk management systems or process improvements, and if pushed over by unanticipated economic headwinds, eight out of ten executives are likely respond by moving business to lower-risk geographic areas. 

The vast majority of Middle East business leaders will be taking a back-to-basics approach when assessing their finance strategies for the year ahead, by pursuing goals tied directly to the core organic growth of their business. This has led 77 per cent of Middle East respondents to place ‘better meeting customer needs’ as the top business priority. A solid majority of respondents are also planning strategic maneuvers such as penetrating new markets (66 per cent), followed by business transformation and innovation (44 per cent). Saudi Arabian executives stand out as the most eager among their peers to expand into new markets (83 per cent) 

As a result, companies plan to deepen their investment in developing new product and service offerings (53 per cent) and improving production efficiency by streamlining processes and upgrading technologies (27 per cent). 

Looking deeper into category-level spending plans, mobile technology was the most expected to see an increase in the region and worldwide. Other high-priority spending categories in the Middle East include transportation and logistics services (31 per cent anticipate increased spending) and travel and entertainment (30 per cent). 

Queried on their number-one technology spending priority, regional respondents say they are most likely to boost spending in integrating different information systems in an effort to enhance efficiency and data security. Nearly the same (25 per cent) plan to allocate more resources to protection of data over the next two years. 

An increase in Middle East companies’ workforce is anticipated in the year ahead. Nearly all regional respondents (73 per cent) expect at least six per cent increase in their companies’ number of employees. As companies look to do so, respondents have cited sales, marketing and administration support staff as the categories of employees that are most difficult to hire and retain (47 per cent each). 

To solve these challenges, Middle East companies plan to make career development opportunities more readily available and make day-to-day work life more fulfilling and comfortable. An increase in training, relocation and geographic rotation programs is expected this year (65 per cent), as well as overall improvement in physical workplaces. Nearly the same proportion of respondents (63 per cent) indicate plans to offer more flexible schedules and remote work opportunities, with the UAE showing the greatest potential to do so (72 per cent). 

And to meet their growing staffing needs, companies in the Middle East are likely to expand their use of temporary and part-time workers (59 per cent) and to “on-shore” (43 per cent), by moving positions from overseas to domestic locations, as opposed to outsourcing and offshoring (just 19 per cent). The story is broadly similar worldwide where more than 7 in 10 respondents cite cost-flexibility as a principal reason for hiring contractors, freelancers and temps. 

Findings suggest that visionary finance executives in the Middle East have great interest in how technological innovations might impact the way they do their jobs and their company’s future. Overall, one fourth of respondents from the region expect next-generation technologies to bring major disruption to their industry (25 per cent) in the next five years, while major disruptions from technology to their country’s well-being (15 per cent) or company’s business activities and performance (11 per cent) are cited less frequently. 

When asked about the emerging technologies that “keep them up at night,” 66 per cent of the region’s respondents affirm they feel most uneasy about robotics and automation (57 per cent, worldwide). Artificial intelligence comes as the second source of concern for 41 per cent of respondents in the region (compared with 54 per cent worldwide). In response, Middle East executives confirm they are already making investments in robotics and automation (54 per cent) and artificial intelligence (40 per cent).

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