According to a new study, while most CEOs worldwide are preparing for a global recession, the top executives of some of the biggest companies in the UAE predict growth and an increase in their profitability.
Only 24 percent of the chief executives in the Arab world’s second largest economy expect an economic downturn, as opposed to 86 percent of executives worldwide, who agree or strongly agree on the possibility of a recession in the next 12 months, consultancy KPMG said in its latest CEO Outlook report on Friday.
Sixty percent of UAE executives expect their companies’ earnings to increase by 2.5 to 4.5 percent annually over the next three years. That is more than twice the number of top executives worldwide, or 28 percent of those polled globally, who expect to see similar growth in earnings.
KPMG, which polled 1,325 corporate bosses worldwide across 11 markets for the survey, said chief executives around the world are getting ready to implement their resiliency strategies over the next six months, while chief executives “in the UAE already had their strategies in place.”
“Local chief executives are forging ahead with bold visions,” said Nader Haffar, chairman of KPMG Middle East and South Asia and chief executive of KPMG Lower Gulf.
“They are cementing strategies to combat inflation pressures and defend against cyberattacks, and are embracing sustainability reporting.”
The optimism stems from the UAE government’s efforts to prepare for potential headwinds and boost the country’s economic resilience as it emerged from the pandemic-driven slowdown.
The country also has advantages that allow it to better withstand global economic shocks, including its strategic location, strong financial reserves, and large asset base sovereign wealth funds, according to the survey.
The UAE economy, which made a strong rebound from the pandemic-driven slowdown in 2021, has picked up pace this year. It is set to expand by 5.4 percent in 2022, according to the UAE Central Bank.
Emirates NBD, Dubai’s biggest lender, expects the economy to expand by 7 percent in 2022, setting up the country’s fastest annual expansion since 2011, when output grew by 6.9 percent.
Abu Dhabi Commercial Bank, meanwhile, projects growth of 6.2 percent, driven by oil and non-oil sectors of the economy.
Business activity in the UAE’s non-oil private sector economy continued to improve in October, with S&P Global purchasing managers’ index rising to 56.6, as new business and output climbed along with a rise in demand and employment.
A reading above the neutral level of 50 indicates growth, while one below it points to a contraction.
Eighty-eight percent of UAE corporate bosses are confident about economic growth prospects for the country. In comparison, 96 percent are bullish about the growth of their industry, a rise from 88 percent recorded in the 2021 survey.
They are, however, less confident when it comes to growth prospects for the global economy. About 56 percent are confident in global growth over the next three years, compared with 71 percent of chief executives worldwide.
Compared to 2021’s 44 percent, it’s still clear that “optimism is moving in a positive direction for the UAE,” KPMG said.
This year’s survey shows that the UAE market “is well positioned to withstand geopolitical instability, inflation, and a looming global recession.”
“With strong financial reserves, diversification of supply chains, and the vigorous adoption of digital and cybersecurity strategies, we’re seeing the impact of the UAE leadership’s foresight to build a resilient economy in the face of global economic downturn.”
UAE policymakers have prepared for a potential slowdown by diversifying supply chains and focusing on boosting productivity by expanding the country’s industrial base.
Global chief executives plan to do the same, but only 32 percent of those surveyed had diversified enough already, compared with 68 percent in the UAE.
“That puts local leaders ahead of their global counterparts by at least six months,” the report said.
Businesses are now turning to on-shoring more aspects of their supply chains. About 32 percent of corporate leaders in the UAE said they planned to source domestically to enhance production resiliency over the next three years.
“With 75 percent of companies worldwide experiencing supply chain disruption during the Covid-19 pandemic, using local suppliers offers insurance against new Covid-19 variants and geopolitical instability,” KPMG said.
About 96 percent of UAE chief executives reported having an aggressive digital strategy — much higher than the worldwide rate of 72 percent.
The Emirates’ corporate leaders are getting increasingly ambitious about technological transformation. More than 80 percent of those surveyed in the UAE — higher than last year’s 64 percent — said driving digital transformation rapidly was critical to competing for talent and customers.
Chief executives worldwide also viewed geopolitical uncertainty as a reason to worry about cyber attacks on their companies. In the UAE, 92 percent of respondents said their organizations were well prepared for a cyber attack, compared to just 56 percent of global corporate bosses.
Sixty percent of business leaders in the UAE said that hybrid and remote work policies have had a positive effect on their organization’s hiring over the past two years.
These policies also boosted employee morale in most cases (56 percent) and positively affected collaboration and innovation (68 percent).
However, only 36 percent of chief executives expect to “continue hybrid work for employees whose roles were traditionally based in-office.”
According to the report, 60% of UAE executives anticipated that they would be back on the job. This is close to the worldwide expectation of 65% of corporate leaders.
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