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Third of MidEast execs say Gulf VAT plan will lead to inflation rise
April 22, 2016
A third of Middle East-based investment executives believe the introduction of value-added tax (VAT) in the Gulf region in 2018 will increase inflation.
According to the sixth annual CFA Institute Middle East Societies Market Sentiment Survey, more than a quarter of regional investment professionals see the implementation of VAT leading to rising costs in doing business.
Low oil prices, geo-political instability and lower government expenditure were named the three most important economic issues for the region in 2016, with respondents noting that revenue diversification strategies will also play a significant role in market performance.
The overwhelming majority of respondents – 82 percent – also said they expect debt raising activities to increase, while 64 percent gave Bahrain and Saudi Arabia’s equity markets the most negative outlook in the region, with Dubai faring the best.
Amer Khansaheb, CFA, president of CFA Society Emirates, said: “Investment professionals in the MENA region are perhaps less optimistic than their colleagues in other markets elsewhere in the world. The GCC is seeing increasing challenges hence it is reflected in the results.
“The biggest issue for investment management professionals in the region will continue to be oil prices, as 71 percent of our members have revealed. We are entering a unique period in the GCC’s economic cycle, where dependence on oil revenue and government expenditure will decrease and we expect to see more strategies in place to create more diversified sources of revenue.”
Other key findings from the survey include that employment opportunities for finance professionals in the GCC will continue to decrease in 2016, according to 63 percent of respondents.
With banks and other financial institutions announcing job cuts, CFA members said they believe that this trend will continue as the job market worsens for finance professionals.
More than a half of investment professionals said they expect further declines in the sovereign credit ratings of GCC countries while 35 percent believe that investor confidence is as low as it was during the global financial crisis of 2008/09.