UAE SMEs lower growth outlook as economy slows - Gulf Business
Now Reading
UAE SMEs lower growth outlook as economy slows

UAE SMEs lower growth outlook as economy slows

Small and medium enterprises have reported difficulties in collecting payments and raising finance, both signs of tightening liquidity

Small and medium enterprises in the United Arab Emirates reported a negative growth for the third quarter of this year as they struggled to raise finance and collect payments, a new survey showed.

According to the latest study by Gulf Finance Corporation, only 78 per cent of SMEs were positive about their growth outlook in Q3, compared to 93 per cent in the previous quarter. Meanwhile the number of respondents who see growth levels stagnating rose to 14 per cent this quarter from six per cent in Q2. Around 7 per cent of the respondents said that they expect growth to be negative in Q3 2015.

“The survey findings indicate the SME sector is experiencing a slow deceleration as the global economic malaise permeates the local economy at a faster rate than anticipated,” said Gulf Finance chief executive David Hunt.

“Although the majority of SMEs still see opportunities for growth, a larger portion of SME respondents report a negative growth outlook and deterioration in their ability to raise finance and collect payments – two telling indicators of tightening liquidity. This was reinforced by a greater number of respondents also reporting a decline in orders, sales and recruitment. The uncertain summer months have been replaced by a nervous looking winter.”

The survey also noted that payment collection among SMEs has worsened this quarter. Only 55 per cent of those polled said that their payment collection ability was strong in Q3, compared to 72 per cent last quarter. In addition, the number of firms who had difficulties collecting payments rose to 15 per cent this quarter from 2 per cent in Q2.

The companies also reported that raising finance is becoming harder, indicating that banks are tightening credit. About 13 per cent of those surveyed by Gulf Finance reported funding difficulties.

SMEs in the UAE have also seen their orders dwindle this quarter, the survey showed. About 7 per cent of the firms polled said that their orders decreased while 22 per cent said that orders remained flat during the period.

Looking ahead, growth forecast for the final quarter is less optimistic as companies took note of the economic slowdown. Just 78 per cent of respondents are forecasting growth in sales the next quarter, down from 91 per cent in Q2.

“Although growth opportunities for SMEs still preside, the less bullish and increasingly pessimistic sentiment in the market is evidence that the effects of a slowing pace of economic growth are beginning to impact SME performance,” said Hunt.

“A number of factors could reverse this trend and we will be monitoring developments closely until the end of the year.”

Falling oil prices and ongoing geopolitical tensions have impacted the economic growth in the region, according to the International Monetary Fund. The growth rate of Gulf countries is about 3.25 per cent this year and is further expected to slow to 3 per cent next year, the fund said.


Scroll To Top