Situations of Rapid Change

GCC Economies Face Impending Market Turmoil: Executives Must Prepare for New Challenges.

Business leaders in the Gulf Cooperation Council (GCC) region are bracing themselves for challenging times ahead as they anticipate increased pressure to transform or restructure their businesses amid an impending market turmoil. According to a survey conducted by Alvarez & Marsal, approximately 75% of GCC business leaders expect a reversal or slowdown in economic growth within the next year.

The survey, which gathered insights from CEOs, senior managers, and advisors on future market trends, revealed that respondents foresee several critical issues businesses are likely to confront. These include reduced demand, higher capital costs, inflationary pressures, market volatility, and changes in taxation and regulations. Additionally, a staggering 89% of the respondents predict a rise in distressed businesses between now and 2024.

Among specific industries, the retail sector is expected to be the worst affected over the next 12 months, followed by financial services and real estate, according to 85% of the respondents. In response to these anticipated challenges, business leaders highlighted that cash and liquidity management will be the most crucial area to focus on during the economic headwinds, as indicated by 89% of the respondents. Cost reduction and capital efficiency were also ranked high on the list of critical priorities in the short term.

One respondent aptly summarized the sentiment, emphasizing the importance of cash-flow-driven operations and decisions for survival in such a volatile market.

For struggling businesses, it is imperative not to wait until it is too late. Addressing underlying operational issues alongside financial restructuring is essential to perform a successful turnaround. Relying solely on short-term solutions to tackle debt burdens may lead to further distress down the line, especially with rising interest rates and inflation.

Despite the majority of respondents expressing concerns about the market’s future, it is worth noting that some observers hold a different view. An earlier report had predicted that the GCC region might largely avoid the economic turmoil expected in the current year. The region’s economy has benefited from robust consumer confidence, significant investments, and proactive efforts to diversify away from fossil fuels while capitalizing on high oil prices.

In conclusion, the economic situation in the GCC region appears to be heading towards market turmoil, and business executives need to be prepared to deal with the crisis effectively. Focusing on cash flow management, cost reduction, and capital efficiency will be critical in navigating the impending headwinds. It is vital for businesses facing distress not to delay addressing their underlying performance issues while seeking financial restructuring. By taking proactive and well-considered measures, executives can pave the way for a more sustainable and resilient turnaround.

How Leverage Experts can support you?

Leverage Experts is a boutique strategy and corporate finance boutique, headquartered in Zürich, Switzerland, with offices in Frankfurt and Dubai. The team is specialized on critical and complex business challenges, including economic turmoil, restructuring, and refinancing businesses.

Often, liquidity constraints of a firm can be mitigated through Net Working Capital optimization. For interested executives Leverage Experts (Middle East) LLC is offering a workshop, to improve the company’s liquidity, click here to have more information.

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