Business Confidence Strengthens on Robust Sector Performance


Overall, the BCI gained 1.2 points compared to Q3 2017. Expectations in the private sector in Georgia declined by 10.9 percentage points, and reached 33.4 index points (down from 44.3 points in Q3). Business performance over the past three months increased significantly, reaching nearly 50.7 points (increasing from 33.5), indicating an improvement in production/turnover/sales. Improved performance of the past three months could outweigh decreased expectations, which led to an insignificant raise in overall BCI.

The BCI index increased in the financial (+19.9), construction (+10.1) and service (+2.5) sectors, and worsened in agriculture (-12.2), retail trade (-2.5), manufacturing (-1.5) and other (-13.9) sectors.

Past performance. The actual performance of businesses significantly increased compared to the third quarter of 2017. In the Q4 2017 reporting period, sales (production or turnover) of the 124 firms surveyed increased from 33.5 (Q3 2017) to 50.7 (Q4 2017).

A significant increase in performance was observed in the construction (+49.3), agriculture (+40.5), service (+28.7) and manufacturing (+21.3) sectors. Significant improvement means that in these sectors, the weighted balance between positive and negative responses increased compared to the previous quarter. In all other sectors, production/turnover/sales for the past three months worsened, with the highest drop recorded for the financial sector (-24.7).

Compared to the previous quarter, a higher share of surveyed firms (69%) stated that employment remained the same over the past three months. Fewer businesses reported either decreases or increases in employment. Moreover, 41% of firms claimed that their business activities remained unchanged over the past three months, while 45% of participants stated that they had improved their performance (which was an increase of 5 percentage points over the previous quarter).


The Expectations Index decreased by 10.9 index points in the fourth quarter of 2017. Expectations about the next three months worsened almost in all sectors, except agriculture (+34.0) and manufacturing (+13.6). The highest decrease was reported in the financial and other sectors (see the table).

As one can see from the table below, business expectations for the three-month period October through December- 2017 decreased for both SMEs and large size firms.

The majority (65%) of surveyed businesses do not expect any changes in employment over the next three months. Furthermore, 28% of firms stated that they would employ more employees in the future (which is lower compared to the previous quarter, by 3%). Meanwhile, 47% of the surveyed firms expected that the economic condition of their businesses would improve over the next three months, and 41% did not expect any changes in the future, while a slightly higher share of businesses expected their business conditions to worsen.    

Sales Prices Expectations.

The Sale Price Expectation Index increased from 7.2 points (Q3 2017) to 17.2 points (Q4 2017). Such a large hike in expectations may be related to renewed depreciation of the national currency (GEL) against our main trade currency (USD).

The increase in the Index is driven by the agriculture, construction and retail trade sectors. The agriculture sector's sales price expectations have increased the most, by 74.4 points. The manufacturing and service sectors expect a noticeable decrease in prices over the next three months (for more information, see Table).

The overall Sales Price Expectations Index increased for both large companies and SMEs.

The majority (62%) 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 31% expect to increase prices in the future.

Limiting Factors

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 124 firms participating in the survey, 30% of large sized firms and 22% of SMEs noted that lack of access to finance was their main obstacle. Meanwhile, 24% of large firms and 32% of SMEs chose lack of demand as the main limiting factor for further business development.

Methodology. The ISET Policy Institute, working in partnership with the International Chamber of Commerce in Georgia (ICC), implemented the Business Confidence Survey in December 2013, and publishes the Business Confidence Index (BCI) on a quarterly basis.

Confidence is measured through a simple survey instrument targeted at top business executives. The survey is online. Answers obtained from the surveys are aggregated in the form of “balances.” Balances are constructed as the difference between the percentage of respondents giving positive and negative replies.

The methodology for compiling the indices is based on the Joint Harmonised EU Programme of Business and Consumer Surveys. 


21 November 2017 15:32