Business Confidence Index: Kvirikashvili effect – Q1 2016
16 March 2016

The Georgian Business Confidence Index (BCI) has gained 3 points (on a [-100/100 scale])1 due to the strengthening of business expectations.

All of a sudden, the expectations of the private sector in Georgia improved and reached 38 index points. This is an improvement from 16 points in the fourth quarter of 2015. Since there is no particular rationale to explain this sharp advance in expectations, the new approach of reforming the investment environment of the new Prime Minister can inform this optimism. Kvirikashvili prioritized business environment problems. The proposition of the pro-private sector solutions could be a reason for such improvement. The Estonian corporate tax system, abolishment of VAT on imported capital goods, simplified tax administration, and resolving insolvency are some of the reforms that are being actively discussed in a quick manner after Kvirikashvili became PM.

On the other hand, the performances of businesses in the past three months remained at a very low level and turned negative, indicating stagnation in production/turnover/sales. This poor performance of the past three months partially offset the improved expectations and the overall BCI increased very slightly, maintaining stability at a low-optimistic level.