Winter is Coming! Business Confidence Index Q4 2018

Overall, the BCI lost 5.5 points compared to Q3 2018. Expectations in the private sector in Georgia decreased by 14.1 percentage points and dropped to 50.1 index points (up from 64.2 points in Q3). Business performance over the past three months decreased, reaching nearly 28.0 points (decreasing from 38.2), indicating a downturn in production/turnover/sales. The synergy of worsening performance in the past three months and lower expectations have led to a drop in the overall BCI.

The BCI index worsened in manufacturing (-55.0), construction (-12.4), agriculture (-10.7) and other (-13.5) sectors. The retail trade, service and financial sectors improved by 5.8, 2.3 and 1.3 points, respectively.

Business confidence in the fourth quarter of 2018 decreased for large firms (-8.1) and improved for SMEs (+8.0). Less optimism and weak performance of the large firms outweighed the improved performance of SMEs and resulted in a decrease of -5.5 in overall BCI.

Past performance

Businesses’ actual performance decreased by -10.2 compared to the second quarter of 2018. In the Q4 2018 reporting period, sales (production or turnover) of the 131 firms surveyed decreased from 38.2 (Q3 2018) to 28.0(Q4 2018).

A significant decrease in performance was observed in the manufacturing (-79.9), construction (-59.1), agriculture (-48.7) and other (-43.9) sectors. A significant decrease means that in these sectors, the weighted balance between positive and negative responses decreased compared to the previous quarter. In the remaining two sectors, production/turnover/sales for the past three months improved: retail trade (+13.4) and service (10.1) sectors.



The Expectations Index decreased by 14.1 index points in the fourth quarter of 2018. Expectations about the next three months improved for the retail trade (+23.4), construction (+5.4) and other (+52.0) sectors. The remaining sectors expect worsening the situation. The highest decrease was reported in the manufacturing and financial sectors

The majority (59%) of surveyed businesses do not expect any changes in employment over the next three months. Furthermore, 31% of firms stated that they would employ more employees in the future.

51% of the surveyed firms expected that the economic condition of their businesses would improve over the next three months, and 36% did not expect any changes in the future, while a lower share of businesses expect their business conditions to worsen.

Sales Prices Expectations

The Sale Price Expectation Index increased from 10.3 points (Q3 2018) to 17.5 points (Q4 2018). The improvement in the Index is driven by an increase in the manufacturing, retail trade and agriculture sectors. The manufacturing, construction and other sector expects a noticeable decrease in prices over the next three months.

The majority (75%) of all surveyed firms are not going to change the prices they charge over the next three months. Only 7% of firms expect to decrease prices, and 19% expect to increase prices in the future.

A low level of consumption activities and lack of access to financing continue to be two of the most significant obstacles for businesses. From a total of 131 firms participating in the survey, 29% of large sized firms and 30% of SMEs noted that lack of access to finance was their main obstacle. Meanwhile, 6% of large firms and 32% of SMEs chose lack of demand as the main limiting factor for further business development.

It should be noted that the BCI results presented here may be overestimated, as the survey only covers businesses currently operating, and not those that have already exited the market. Firms still in operation are more likely to have a negative outlook to some extent.

12 November 2018 16:45