Harnessing CEO Confidence In The Middle East To Accelerate Business Transformation

As 2023 gets underway, it’s no surprise to find that CEOs all over the world are far more pessimistic than they were a year ago about the state of the global economy and what it could mean for their own businesses. After all, the story of the past few months has been one of resurgent inflation, rising interest rates, geopolitical tensions, supply chain disruptions, and commodity shocks, including concerns about energy security.

This gloomy sentiment is not shared by the CEOs in the Middle East, where the 26th PwC CEO survey shows that 61% of business leaders expect growth in the region to improve in 2023, compared to just 21% in North America and 18% in Europe. Almost two-thirds of CEOs in the Middle East are extremely confident or very confident about prospects for revenue growth over the next 12 months, and 71% are confident about the outlook for the next three years. This bullish view is tempered by the need to control costs.

This GCC exceptionalism comes about in part because the macroeconomic picture in the region looks much better than in many other places. Inflation in the GCC countries is about half the rate or less than in Europe and the U.S.: it peaked just below 5% in 2022 and eased to 4% towards the end of the year. Among G-20 economies, Saudi Arabia recorded the strongest GDP growth in 2022 by a large margin, averaging 7.6%, according to the IMF, thanks to robust non-oil growth as well as gains from oil and gas exports. The Saudi growth rate is more than double the global average.

Taking note of this outlier status is encouraging—but what’s important is that CEOs in the Middle East now act on it and decisively. They need to use their relatively undiminished confidence in the prospects for business over the short to medium-term to act on strategic priorities that will make them stronger for the longer term—essentially future-proofing their companies and the region’s economy more broadly.

Top of the list of priorities is a pronounced focus on digital transformation and increased deployment of advanced technologies, including AI, and automation. A second major priority is moving to improve the sustainability of their operations and the economy more broadly at a time of growing concern about climate risk. It is important for regional CEOs not to neglect the critical importance of hiring and retaining talent that can propel and accompany their operations into a new era.

Middle East CEOs understand the need for transformation. This is evident as more than half are already diversifying products and service offerings, and more than one-third of the remainder are considering doing so. Unlike their global peers, they are not delaying deals or slowing investments. Technology features prominently as they prepare for further and faster digital transformation. More than four in five regional business leaders are planning to invest in automation processes and systems, and two-thirds expect to deploy cloud technology, AI, and other advanced technology in operations.

Efforts to “green” operations are also now on the agenda. About half of CEOs in the region are either taking steps to mitigate climate risk or are in the process of doing so. The COP27 summit in Egypt in November 2022 helped focus attention, and COP28 in the U.A.E. will likely accelerate this focus. A study by the WEF and PwC shows that GCC countries could generate revenues of around 2.5% of GDP if they put in place an international carbon price floor.

Talent, too, is increasingly featured on business agendas, with three in four Middle East CEOs saying they expect to invest in reskilling their workforce, with the private sector looking to increase workforce participation by national citizens, especially in Saudi Arabia and the U.A.E.

These responses are grounds for optimism in the region. The main question is how quickly and significantly the intentions will be put into action. That the region seems to be largely escaping the global slowdown certainly helps build confidence. Now, CEOs need to use that confidence to build the future.