Business Confidence Index: business optimism turns to realism
09 August 2017

The Georgian Business Confidence Index (BCI)* has decreased slightly, reaching 27.0 index points, which is a -2.0 index point loss over the previous quarter. The third-quarter drop in the BCI was mostly driven by the notable decline of the Expectations Index, which judging from the previous quarter's findings, may be explained by private sector realignment with reality rather than by worsened economic conditions.

After a significant increase of 12.3 index points in Q2, the Past Performance Index, which reflects businesses' assessment of their own economic performance in the previous quarter, increased by 11.2 points. Compared to other sectors, the construction sector assessed their past performance most positively.

Business optimism about the overall economy dropped to below the Q2 2017 (-18.8, QoQ) level, but remained higher than Q3 2016 at 44.3 index points. Manufacturing and Retail Trade sector SMEs have contributed the most to the drop in business optimism. 

The Sales Price Expectation Index decreased marginally. Businesses in the service sector predict the highest price drop in the next quarter, while the highest price increase is predicted in the agricultural sector. No significant overall price increases should be expected in the coming months.

Compared to SMEs, large businesses demonstrated a slightly higher drop in expectations, but much better past performance, leading to the increasing gap between large businesses and SMEs in the overall Index.

Irrespective of their size, the main factors that continue to limit business activities are lack of demand and access to finance.