Business confidence declines

SHARE   |   Monday, 29 January 2018   |   By Kabelo Adamson

Confidence levels among businesses weakened marginally in the second half of 2017, compared to the first half of that year, but improved going forward into 2018. This is according to the Business Expectations Survey (BES) conducted by Bank of Botswana and the survey is carried twice a year. The survey indicates that firms seem to have developed some uneasiness with the business conditions as their confidence level for the period was nine (9) percent points lower than perceptions (55 percent) about the same period last year. The lower confidence level is further reflected in the forecast lower growth of 3.5 percent for the domestic economy by local businesses compared to 2018/19 Business Strategy Paper (BSP) forecast output growth of 4.7 percent. However, in line with previous trends, more firms are said to be expecting better business conditions going forward with an overall confidence level of 52 percent for the first half of 2018 and 64 percent for the whole 2018. The improvement in business confidence is thought to be linked to government’s projections of a pick-up in economic performance this year. The BSP, which was presented last September at a Budget Pitso in Gaborone, projects output growth of 4.7 percent and 5.3 percent for 2017 and 2018 respectively. The growth is to be driven mainly by some improvements in the mining and services sectors.
The mining sector is expected to recover due to improvement in demand for diamonds as a result of favourable global economic prospects while the services sector is expected to benefit from stability in water and electricity supply and the projected expansion in government spending. As it stands, confidence amongst domestic–oriented firms is said to lower at 46 percent from 48 percent in the first half of 2017. The level of optimism for domestic firms improves to 51 percent in the first half of 2018 before picking up to 67 percent in the second half of the year to December 2018. Regarding the export–oriented businesses, the confidence level was at 50 percent in both halves of 2017 and is anticipated to remain the same in the first half of the year before declining to 42 percent in the second half of the year. “Thus, the expected upswing in the overall business confidence for 2018 is due to a more positive outlook by domestic-oriented businesses, perhaps premised on the expected increase in government expenditure in 2018/19,” the survey indicates. The BES, which is conducted twice a year, summarises views of the business community regarding their perceptions about the current and future state of the economy. In the survey, businesses respond to a range of questions relating to, among others, the business and the outlook for economic growth, inflation and business performance over the survey horizon.