After the sharp decline in Q2 2015, business confidence (BCI) in Georgia showed signs of rebounding in Q3. In line with expectations, April, May and June were ex-post not particularly favorable months for Georgian businesses.
Out of the 211 companies surveyed, about half reported having trouble in business activities in April, May and June (reflected in low sales, turnover or production numbers). Accordingly, the main driver of the overall BCI rebound in Q3 was the strident increase in expectations. The business expectations index increased by 30 index points in one quarter – a sharp rebound that almost compensated for the loss of confidence in Q2 2015.
After being steadily optimistic for most of 2014 and in the first quarter of 2015, Georgia’s business confidence dropped by 24.5 points to an all-time low level of 3.6 on a scale of [-100; 100] points. The survey, which included 168 firms, suggests that business confidence declined on all measures, across all sectors, and for all firm sizes. Moreover, it is reflected in business perceptions concerning both current performance and expectations concerning the future.
The sharp decline in business confidence appears to be related to the recent depreciation of the Georgian lari and the political wrangling that followed. The drop in business confidence comes after seven months during which Georgian consumer confidence has been steadily declining, affecting consumer demand and sales.
While the retail sector was the first one to be affected by the slump in demand, second quarter data suggest that the Georgian financial sector is also starting to feel the heat. Financial sector confidence dropped by a record 50.8 points (from 50.9 index points in the first quarter of 2015 to merely 0.1 points in the second quarter)!
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