On Tuesday, June 9th, ISET Policy Institute, together with the International Chamber of Commerce (ICC) Georgia, held a press conference to present the significant results of Business Confidence survey for 2nd Quarter of 2015. The press conference was led by Maya Grigolia, Senior Researcher at ISET-PI. Additional comments were provided by Eric Livny, President of ISET, and Aleksi Aleksishvili, Chairman of PMCG, and Vice Chair of ICC.
Various media representatives and other stakeholders attended the event. 4 major TV Channels in Georgia and up to 20 local and international online media, broadcasted the press conference and the recent findings of the BCI survey.
Survey of 168 companies operating in Georgia, revealed a sharp drop of business confidence on all measures, across all sectors, and for all firm sizes. After being steadily optimistic for most of 2014 and in the first quarter of 2015, Georgia’s business confidence dropped 24.5 points to an all-time low level of 3.6 on a scale of [-100; 100] points.
The sharp decline in business confidence appears to be related to the recent depreciation of the Georgian lari and the political wrangling that followed. According to Maya Grigolia, business confidence first declined in retail sector, due to its latest position in production chain and sensitivity towards decreased consumer demand. While the retail sector was the first one to be affected by the slump in demand, second quarter data suggest that the Georgian manufacturing, service, agriculture, and financial sectors are also starting to feel the heat. “Given the sluggish sales, apparently firms are taking the part of the increased costs on their shoulders and as a result they cut their profit margins, instead of increasing price expectations“ – the researcher added.
The drop in business confidence comes after seven months during which Georgian consumer confidence has been steadily declining, affecting consumer demand and sales. The President of ISET, Eric Livny suggests that based on the stabilized consumer confidence, we can predict that optimistic attitudes will soon reach to firm managers as well. “Even though the BCI results are negative" - Livny mentioned - "data shows that the worst is behind and there is the light at the end of the tunnel”.
Based on Aleksi Aleksishvili's statement, stabilized institutional and political environment, increased foreign investments and macroeconomic stability are three key factors that can take Georgia out of the stagnant situation. However, improvements should not be expected to be immediate. “It will take time to completely recover from the shock Georgia went through. If three mentioned factors are present the change will happen, but it will happen gradually” – Aleksishvili noted.
Full Business Consumer Index report for the Q2 2015 can be found here.
To view the full Press Conference recording click here.