GCC business leaders forecast more financial distress ahead

11 September 2023 Consultancy-me.com 2 min. read
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Seven out of ten CEOs and business leaders in the Gulf Cooperation Council (GCC) believe there will be more businesses experiencing financial distress in the next 12 months. That is according to a new survey from Alvarez & Marsal, which reviews at the macroeconomic situation in the Gulf region.

Despite the majority of leaders surveyed seeing more businesses struggling in the near future, the number of leaders that expect the macroeconomic climate to deteriorate over the next 12 months has fallen from 75% last quarter to 48%.

The main areas of concern remain cost of capital and inflation. The inflation rate in the UAE is currently set at 5.4% and the central bank of Saudi Arabia has set a rate of 5.75%, which reflect similar moves by the US federal reserve.

Respondents identified the most critical areas of focus

With the increase in interest rates and a tighter fiscal outlook, some business leaders are ready for lenders to be colder towards businesses. With access to finances becoming more important, businesses in need of refinancing will face difficulties maintaining their financial health.

“While the outlook for most sectors appears to have improved, retail remains a key sector of concern, with 69 percent of respondents anticipating continued pressures due to tightening consumer wallets and the ongoing shift to digital platforms,” according to Alvarez & Marsal.

Other sectors expected to be negatively impacted in the coming 12 months include real estate, the industrial sector, transport, and financial services.

The biggest concerns identified by respondents are

A total of 76% of the respondents in the survey said that they do not often see businesses enacting operational restructuring alongside financial restructuring. The majority of business leaders and CEOs surveyed said that they often saw only temporary outcomes when it comes to operational restructuring.

“The consensus is that restructuring should go further in unlocking value and improving cash generation, which would enable businesses to meet debt obligations and thrive in the future,” said Alvarez & Marsal, which is highly regarded in the restructuring advisory landscape, having worked on some of the world’s most iconic cases including Lehman Brothers and NMC Health.

Last year, Alvarez & Marsal was named one of the leading restructuring consulting firms in the Middle East.