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

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 Business Optimism Index

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

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

World Economic Outlook Real GDP GrowthGlobal composite manufacturing & services PMI 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 Q as against a revised GDP growth rate of 5.6% in Q growth revised upward to 3.3% The global composite PMI showed expansion (i.e. scoring > 50) for the eleventh consecutive month Source: IMF forecast, Q1 figures are actuals

Economy of Saudi Arabia 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 Source: IMF

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

Business Optimism Indices Trends : Non Hydrocarbon Sector

Manufacturing Sector 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 Global Manufacturing Purchasing Managers’ Index Source: JP Morgan and markit economics

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

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

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

Finance, Insurance, Real Estate & Business Services Sector 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 Global Services Purchasing Managers’ Index Source: JP Morgan and markit economics

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

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

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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