ISET Business Confidence Index | New Year, New Start?
After a significant deterioration in the previous quarter, BCI has increased by 32.1 points for Q1 2021 compared to Q4 2020 and reached 3.4. Expectation in the Georgian private sector has improved by 64.1 index points, reaching 22.5. As for business performance over the past three months, it has increased, reaching -29.2 points, indicating an upturn in production, turnover, and sales. Compared to the previous quarter, the Sales Price Expectation Index has increased significantly, showing growth in the market share of business owners who expect higher sales prices.
The BCI increased in most economic sectors, with the highest increase in construction (70.6), followed by service (55.3), financial (23.0), agriculture (11.6), and manufacturing (1.6) sectors. Compared to Q4 2020, BCI decreased in retail trade (-14.3).
Business confidence for the first quarter of 2021 has increased both for SMEs (6.1), and large firms (35.0).
Past performance
The Businesses’ Past Performance Index, which shows the development of businesses' production, turnover, and sales in the past three months, increased compared to Q4 of 2020 and reached -29.2 for Q1 2021.
Significant improvement in performance was observed in the construction sector (88.4), followed by the service (32.5) and agriculture (16.4) sectors. A decrease in past performance was observed in retail trade (-51.6), manufacturing (-8.4) and financial (-7.0) sectors.
Expectations
The Expectations Index increased significantly by 64.1 index points for Q1 2021 and reached 22.5. Prospects for the next three months have improved for every sector, except retail trade (19.5-point decrease). The most significant increase is observed in the construction (111.5), followed by service (110.0), financial (47.6), manufacturing (39.9), and agriculture (5.5) sectors.
Business expectations have increased for both large firms (70.3) and SMEs (18.7).
29% of the surveyed businesses do not expect any changes in employment over the next three months. 26% of firms stated that they would hire fewer employees in the future, however, 45% think that they would hire more.
37% of the firms surveyed expect the economic condition of their businesses to improve over the next three months. 31% do not predict any changes, leaving 32% of businesses that believe their business conditions will worsen.
Sales Price Expectations
The Sales Price Expectations Index increased significantly from 2.7 points (Q4 2020) to 29.7 points for Q1 2021. The index increased in every sector, except construction (47.7 points decrease). The overall Sales Price Expectations Index has increased for both SMEs and large companies.
Around 42% of all firms surveyed do not intend to change their prices over the next three months. 38% of firms expect to increase their prices, and the remaining 21% will consider decreasing their prices in the future.
A lack of demand and limited access to financing continues to be one of the most significant obstacles for both large companies and SMEs. For Q1 2021, "other" factors became more important for both large companies and SMEs (the last four-quarter average was 27% and 25%, respectively) which, could reflect the Covid-19 second-wave restrictions 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.