ISET | Business Confidence Index Q3 2020: Momentous Rebound of Business Optimism

After a significant deterioration in the previous quarter, the BCI has increased by 17.3 points compared to Q2 2020 and reached -9.9. Expectations in the Georgian private sector have improved by 62.2 index points, up to 20.8. As for business performance over the past three months, it has decreased, reaching -40.6 points, indicating a significant downturn in production, turnover, and sales. Compared to the previous quarter, the Sales Price Expectation Index has also decreased, showing growth in the market share of business owners who expect lower sales prices.

The BCI increased in most economic sectors, with the highest improvement in construction (39.6), followed by financial (24.2), service (18.5), and retail trade (18.4). Compared to Q2 2020, BCI decreased in the manufacturing (-12.4) and agriculture (-8.3) sectors.

Business confidence in the third quarter of 2020 has increased both for SMEs (21.8), and large firms (15.0).


Businesses’ Past Performance Index, which shows the development of businesses' production, turnover, and sales in the past 3 months, decreased further by 14.4 points compared to Q2 of 2020 and reached its new historic low of -40.6 for Q3 2020.

A significant deterioration in performance was observed in the retail trade sector (-59.8), followed by the agriculture (-22.0), service (-17.5), and financial (-4.3) sectors. The smallest decrease in past performance is observed in the manufacturing (-1.7) sector. The decline in these sectors highlights that the weighted balance between positive and negative responses decreased compared to the previous quarter.


The Expectations Index increased significantly by 62.2 index points for Q3 2020 and stopped at 20.8. Prospects for the next three months have improved for every sector, except manufacturing (-34.9-point decrease). The most significant increase is observed in the financial (79.5), followed by the service (76.4), retail trade (61.7), and agriculture (9.0) sectors.

Business expectations have, on the whole, increased for both large firms (61.5) and SMEs (67.1).

71% of the surveyed businesses do not expect any changes in employment over the next three months, however, 11% of firms stated that they would hire fewer employees in the future and 19% think that they would hire more.

35% of the firms surveyed expect the economic condition of their businesses to improve over the next three months. 44% do not predict any changes in the future, leaving 21% of businesses that believe their business conditions will worsen.


The Sales Price Expectations Index decreased further from -5.3 points (Q2 2020) to -8.3 points for Q3 2020. The index declined in every sector, except service (11.8 points increase). The overall Sales Price Expectations Index has decreased for both SMEs and large companies.

Around 64% of all firms surveyed do not intend to change their prices over the next three months. 21% of firms expect to increase their prices, and the remaining 15% will consider decreasing their prices in the future.

A lack of demand and limited access to financing continues to be the most significant obstacles for both large companies and SMEs. For Q3 2020 access to finances and lack of demand became more important for both types of firms, especially for large companies (in the last four quarters, on average, 30% of large companies mentioned access to finances as a limiting factor, while, 27% mentioned lack of demand), which could reflect the post-Covid-19 situation that business sector is currently facing.

It should be noted that the present BCI results 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 demonstrate a negative outlook.

11 September 2020 08:18