The Georgian Business Confidence Index (BCI) has decreased by 7.4 percentage points (-7.4, QoQ), but at 17.6 it remains higher than it was in the same quarter last year (12.0). The fourth-quarter decrease in the index was mostly driven by a significant decline in expectations. 

With 44% of business executives reporting unchanged performance in the last three months, the past performance index actually posted a slight increase, rising by 0.4 points to 30.8. Compared to other sectors, the manufacturing sector saw the highest increase.

Business optimism about the overall economy dropped to below the Q3 2016 (-12.2, QoQ) level, but remained higher than Q4 2015 at 25.0 percentage points. The majority of business respondents expect their economic performance to improve, and 18% expect it to decrease. The highest drop in expectations about the end of the autumn season was present in the retail trade sector.

The sales price expectation index increased (+2.3 QoQ) and turned negative for the construction sector.

Usually, business expectations and past performance indices move together, but according to the last two quarters of 2016, the past performance index started to increase and expectations began to fall. Regardless of the pessimistic business expectations data, however, surveyed businesses reported a stronger actual performance compared to the previous quarter (Q3/16), with the past performance index's third sequential improvement. Therefore, it can be implied that the downward trend in expectations is a result of concerns, rather than alarming conditions of the Georgian economy.

While two consecutive quarters of declining survey results clearly show that businesses are realigning their expectations down from the highs of Q2/2016, we aren’t observing overwhelming evidence that supports an extensively depressed outlook.