Qatar’s overall business environment outlook has improved in both the hydrocarbon and non-hydrocarbon sectors, but declines in key areas throw up a number of challenges.

According to the Business Optimism Index (BOI) released by Dun and Bradstreet and sponsored by the Qatar Financial Centre (QFC) Authority, confidence in Qatar’s overall business environment is at an all-time high. However, respondents expressed a cautious optimism for the overall outlook given the many challenges faced in key areas.

Deputy Chief Executive Officer of the QFC Authority, Yousuf Al Jaida, said:

It’s no surprise that Qatar’s overall business environment outlook has improved in both the hydrocarbon and non-hydrocarbon sectors. The challenges we see cited as concerns by respondents are indicative of a maturing economy. We are seeing that companies are rising to the challenges presented by a growing private sector. At the QFC, we assist businesses in strengthening their position in the market for example through the many tax advantages we offer, such as the credit for tax losses scheme, or 0% concessionary tax rate for local entities. The QFC has broadened its platform to incorporate both financial services and non-financial services firms to meet the demands of an expanding economic landscape. ‘

The outlook for the Construction sector has witnessed a slight moderation with the composite BOI declining from 52 in Q1 to 46 in Q2. Whereas the composite BOI for the Transport & Communications sector is lower by nine points to 40 in Q2. The composite BOI for the Finance, Real Estate & Business Services sector has retracted significantly from the record highs achieved in Q1.

Despite these challenges, Qatar’s economy continues to thrive and drive business to all sectors. According to the BOI report, the overall business environment outlook has improved in both the hydrocarbon and non-hydrocarbon sectors.

Associate Director of Dun and Bradstreet, Prashant Kumar, said:

Despite a number of negative factors in this quarter’s report, the overall business environment outlook is good. Q2 has proven a difficult quarter this year due to extenuating circumstances. Qatar continues to develop and diversify its economy to increase the scope of its non-hydrocarbon sector. Not only is the carbon-based economy healthy but the knowledge-based economy is expanding rapidly at the same time.’

27% of hydrocarbon and 39% of non-hydrocarbon firms expect no negative factors to impact business operations in Q2, compared to 22% and 23% respectively in the previous quarter.

The reason for the composite BOI reflecting a decline in a number of sectors this quarter can be attributed to many different factors. For example, Q1 saw record highs in the Trade & Hospitality sector, which were thanks in part to the success of the World Handball Championship predictions outlined in the Q1 report.

And, while the impact of falling oil prices is a major concern for firms in the hydrocarbon sector, competition continues to be the leading area of concern in the non-hydrocarbon sector. However, there is no sign of contraction in either sector. In fact, in the hydrocarbon sector, 33% of firms have planned expansion investments during Q2, compared to only 15% in Q1. The trend has remained stable for non-hydrocarbon firms as 36% intend on taking up expansionary activities in the current quarter, the same level seen in Q1.

Finally, the small and medium enterprises (SMEs) community continues to be more optimistic about the overall business environment, with 42% of respondents indicating that they do not anticipate negative factors to hamper operations in Q2, while for large companies the corresponding number is 26%. Conversely, large companies have a stronger outlook relative to SMEs in respect to new orders and net profits.