Signs of Optimism Coming from Agriculture & Manufacturing Industries

Business Confidence Index Q1 2020.

In the first quarter of 2020, BCI increased by 7.3 index points reaching 25.8. Business confidence improved across all sectors with the exception of the service industry. The largest growth was observed in agriculture, followed by the manufacturing industry. In both sectors, the increase in BCI was driven by improved past performance as well as more optimistic future expectations.

The Past Performance Index, which considers the business sector's assessment of their own economic performance in the previous quarter, showed an upward trend, increasing by 2.4 points in Q1 2020. Manufacturing and agriculture industries were the lead performers in this regard.

After a sharp drop in Q3 2019, the Expectations Index, which reflects business optimism, has almost fully recovered in the last two quarters reaching 42.7 index points. In Q1 2020 all sectors, except the service industry, have demonstrated heightened expectations.

The biggest upswing was observed in the Sales Price Expectations Index, which reached its highest value (18.6) since Q1 2017 (24.3). This comes after a decreasing trend observed during the past two quarters.

Analysis of indices by firm size shows that overall Business Confidence, Past Performance, and Expectations indices have increased for both large companies and SMEs. As for the Sales Price Expectations index, it has improved for large firms but slightly deteriorated for SMEs.

The main factors that limit business activities for firms of all sizes remain the lack of demand and limited access to finance.

After significant recovery in the previous quarter, the BCI increased further by 7.3 points compared to Q4 2019 and reached 25.8. Expectations in the Georgian private sector improved by 11.5 index points, rising to 42.7. Moreover, business performance over the past three months has increased, reaching 29.3 points, indicating an upturn in production, turnover, and sales. Thus, the rise in both business expectations and past performance has led to an improvement in the overall BCI. Compared to the previous quarter, the sales price expectation index has increased, showing growth in the market share of business owners who expect higher sales prices.

The BCI increased in most economic sectors, namely in the agriculture (27.6), manufacturing (25.5), retail trade (15.2), construction (12.5) and financial (8.7) sectors. The only exception was service, in which the BCI declined by 5.1 index points.

Business confidence in the first quarter of 2020 has increased both for SMEs (9.2), and large firms (7.7).

Past performance

Businesses’ Past Performance Index that shows the development of businesses' production, turnover and sales in the past 3 months, increased by 2.4 points compared to Q4 of 2019 and reached 29.3 in Q1 2020.

A significant upsurge in performance was observed in the manufacturing (61.2) and agriculture (50.2) sectors, followed by retail trade (13.2), and finance (7.2). The substantial increase in these sectors highlights that the weighted balance between positive and negative responses increased compared to the previous quarter. In the remaining sectors, Past Performance Index decreased: in service (-20.8) and construction (-0.9). Business activities in past 3 months have improved for both SMEs and large businesses. For large firms index increased by 3.4 points and raised to 36.8 in Q1 2020; for SMEs, the same indicator increased by 3.6 and stopped at -1.3 index points.


The expectations index increased by 11.5 index points in Q1 2020. Prospects for the next three months improved for most business sectors; the one exception being service (-5.9). The greatest increase was reported in agriculture (78.3), followed by construction (27.1) and retail trade (24.1) sectors. Business expectations have, on the whole, improved for both large firms and SMEs.

The majority (70%) of the surveyed businesses do not expect any changes in employment over the next three months. Furthermore, 25% of firms stated that they would hire more employees in the future and only 6% think that they would hire fewer.

Around 45% of the firms surveyed expect the economic condition of their businesses to improve over the next three months. While, 40% do not imagine any changes in the future, leaving a small proportion of businesses that believe their business conditions will worsen.

Sales Price Expectations

The Sales Price Expectations Index increased from 11.3 points (Q4 2020) to 18.6 points (Q1 2020). This improvement is driven by a rise in the manufacturing and service sectors. The overall Sales Price Expectations Index has decreased moderately for SMEs and increased for large companies.

Around 67% of all firms surveyed do not intend to change their prices over the next three months. Only 7% of firms expect to decrease their prices, and the remaining 26% will consider increasing their prices in the future.

A lack of demand and limited access to financing continue to be the most significant obstacles for both large companies and SMEs. Large companies also mention a shortage in the labor force as a further hindrance.

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, which exited the market are, to some extent, more likely to have a negative outlook.

24 February 2020 18:57