Saudi Arabia Business Optimism Index – Q3 2010

1. Saudi Arabia Business Optimism Index – Q3 2010 Presented by Dun & Bradstreet South Asia Middle East Ltd. (D&B)National Commercial Bank (NCB)

2. Business Optimism Index • The D&B Business Optimism Index is recognized world over as an indicator which ascertains the pulse of the business community • Provides insight into the short-term outlook of business units on key business parameters including sales, profits, pricing, headcount and investment • Provides analysis of major trends and issues concerning the business community

3. Survey • Sample of business units representing Saudi Arabia’s economy is selected • 500 business owners and senior executives across business units are surveyed • The Q3 survey was conducted during June 2010 • Respondents are questioned about their expectations on relevant business parameters • Survey also captures respondent feedback on current business conditions

4. Composite Business Optimism Index • The Composite Index is calculated separately for the hydrocarbon and non hydrocarbon sector • To provide further analysis of the non hydrocarbon sector Composite Indices are calculated for each of the five economic subsectors

5. World Economic Outlook Real GDP Growth Global composite manufacturing & services PMI Source: IMF forecast, Q1 figures are actuals Source: JP Morgan and markit economics • Global economy expected to grow 4.6% in 2010, up from April forecast of 4.2% • The US economy registered growth of 2.7% in Q1 2010 as against a revised GDP growth rate of 5.6% in Q4 2009. 2010 growth revised upward to 3.3% • The global composite PMI showed expansion (i.e. scoring > 50) for the eleventh consecutive month

6. Saudi Arabia’s growth for 2010 is projected at 3.7% (0.1% in 2009); led by government spending amid high oil revenues After witnessing a drop in 2009, SAMA’s foreign assets are forecast to grow Economy of Saudi Arabia Source: IMF Source: IMF

7. Composite Business Optimism Indices Non-hydrocarbon sector Hydrocarbon sector • Non hydrocarbon sector outlook declines amid weak Selling Price and Sales Volume expectations • Hydrocarbon sector outlook improves on expectations of higher Selling Price

8. Business Optimism Indices Trends : Non Hydrocarbon Sector

9. Manufacturing Sector Global Manufacturing Purchasing Managers’ Index Source: JP Morgan and markit economics • The Global Manufacturing Purchasing Managers’ Index has shown growth for twelve consecutive months • Saudi manufacturing sector optimism declines on weak selling price outlook • Demand levels are expected to remain unchanged as compared to last quarter

10. Construction Sector • The global construction sector is witnessing a gradual upturn; sector is evolving as emerging markets continue to drive global economic recovery • Saudi’s construction sector optimism declines as BOI for Volume of Sales slides 42 points, New Orders outlook still remains robust • Recent selloff in international commodities market has presumably taken BOI for Selling Price down 27 points

11. Trade & hospitality Sector Retail sector growth in developed countries likely to remain slow whereas emerging markets are expected to witness rising sales in 2010 Outlook for Saudi trade & hospitality sector declines on weak Selling Price outlook, BOI is down 33 points to 10 BOI for Sales Volume and New Orders register only a marginal decline

12. Transport & Communications Sector Global transportation sector showing strong signs of revival amid recovery in trade sector and increased passenger traffic Saudi transport & communications sector optimism declines on weak demand outlook as BOI for Sales Volume and New Orders has fallen 27 and 13 points respectively

13. Finance, Insurance, Real Estate & Business Services Sector Global Services Purchasing Managers’ Index Source: JP Morgan and markit economics • The Global Services PMI for the month of May stands at 56.3, showing expansion for the eleventh month in a row • Saudi service sector optimism declines on a 20 point fall registered in BOI for Sales Volume and a 22 point drop in New Orders parameter

14. Business Optimism Indices Trends : Hydrocarbon Sector • Oil prices fell by 20% to USD 67 from their early May peak of USD 84 on concerns of Euro Zone debt crisis, but have risen since then to average USD 73 in June • Saudi’s hydrocarbon sector optimism has improved significantly in the third quarter primarily due to a higher BOI score for Level of Selling Prices • Last quarter’s dip in BOI for Level of Selling Prices for the hydrocarbon sector is validated by the decline witnessed in oil prices during May

15. Other Key Highlights • Raw material costs is the leading concern for non hydrocarbon segment, 44% of the respondents have cited it as a factor which might affect their business • Availability of finance is a concern for 32% of the business units in non hydrocarbon sector • 40% of companies in the non hydrocarbon sector intend to investment in business expansion • For 44% of the companies in the hydrocarbon sector project delays could be a major factor which might impact their business in the third quarter

16. Conclusion • Business outlook mixed in Saudi Arabia amid concerns of anemic global economic recovery • Non hydrocarbon sector optimism drops on lower BOI for Sales Volume and Selling Price • The Manufacturing sector, in contrast to the other 4 non-hydrocarbon sectors, expects demand to stay robust as the BOI for both Sales Volume and New Orders remain relatively unchanged • Hydrocarbon sector displays surge in optimism levels on the back of expectations of rise in level of Selling Prices

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