A significant uptick in economic confidence throughout the Middle East for Q3 2024 is highlighted by the most recent Global Economic Conditions Survey (GECS) conducted by the Association of Chartered Certified Accountants (ACCA) and the Institute of Management Accountants (IMA). This increase signals a sense of optimism, attributed to the global economic unpredictability and regional challenges.
Positive trends in capital expenditure and employment
The survey highlights marked improvements in the region’s Capital Expenditure and Employment indices, both of which have surged well above their historical norms. This positive trend illustrates the strong performance of non-oil sectors in key nations like Saudi Arabia, even as oil prices have dipped since the Q2 survey. These findings underscore the region’s resilience, pointing to a shift toward diversified economic growth and enhanced regional stability.
Sustained demand amid uncertainty
Although the New Orders Index experienced a slight decline, it remains above average, signifying sustained demand and investment across multiple sectors. Notably, these results emerge during a time of increased uncertainty, with geopolitical tensions and fluctuations in global oil prices posing significant challenges.
Optimism in government spending
Kush Ahuja, head of ACCA Middle East, remarked on the encouraging trends, stating that the positive outcomes likely reflect the ongoing resilience of the non-oil economies in pivotal countries like Saudi Arabia, alongside rising expectations for more accommodative U.S. monetary policy, since many regional currencies are pegged to the U.S. dollar. He also noted that respondents have grown more optimistic about potential increases in government spending over the next year.
Strategic economic policies strengthening stability
The survey indicates a rising confidence that strategic economic policies and investments are effectively strengthening the Middle East’s economic and financial stability, with many economies gearing up for sustained growth. Despite a turbulent global environment, the findings suggest the region is strategically positioned to address these challenges.
Future growth projections
ACCA’s Chief Economist, Jonathan Ashworth, commented on the promising performance of the Middle East in Q3, especially given the current geopolitical climate. He mentioned that the region’s commitment to non-oil growth is likely to continue fostering this positive trend and that GDP growth is anticipated to accelerate in 2025, supported by increased oil production.
Regional confidence comparisons
In North America, confidence improved, but only recovered less than half of its previous decline. Conversely, a notable drop in confidence was observed in the Asia Pacific region, likely influenced by concerns over the ongoing weakness of the Chinese economy. Western Europe also saw a significant decline in confidence, particularly in the U.K., amidst worries about tax increases in the upcoming Budget. Overall, global confidence experienced a moderate downturn.
Operating costs and monetary policy
The proportion of respondents reporting rising operating costs remains high by historical standards in most regions, suggesting that central banks should approach monetary easing with caution, especially in light of ongoing geopolitical issues. On a brighter note, the proportion of global respondents facing difficulties in accessing finance decreased further, reflecting easing policies by central banks.
Global economic resilience and caution
Jonathan Ashworth noted that the global economy has shown considerable resilience thus far in 2024, but the latest survey indicates a potential easing in growth at this moment.
Read more: Global economy at a dangerous juncture, World Bank chief says
North American outlook
Alain Mulder, senior director of Europe Operations & Global Special Projects at IMA, added that while the rise in North American confidence is encouraging, the key indicators suggest a slowdown in the U.S. economy and a notable caution among businesses. However, he pointed out that with the job market holding strong and the Federal Reserve initiating its rate-cutting cycle, a soft landing for the U.S. economy remains the most likely scenario.
Navigating elevated uncertainty
Ashworth concluded by stating that increased policy stimulus should support the Chinese economy, and the Federal Reserve’s shift toward rate cuts, along with actions from other central banks, will likely bolster global activity. Nevertheless, he cautioned that geopolitical risks are exceptionally high, and significant uncertainty surrounding the upcoming U.S. election may heighten corporate caution. Ultimately, he emphasized that businesses are navigating a landscape filled with elevated uncertainty.
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