Business confidence surges
Isaac Pinielo | Tuesday January 6, 2015 12:00
Based on perceptions among the local business community about the prevailing state of the economy, the survey revealed that overall confidence in the prevailing business conditions during the second half of 2014 stood at 52 percent.
This is 14 percent higher than the figure recorded in the March 2014 survey, but lower than the 64 percent expected for this period in the earlier survey.
The survey however stated that the rebound reversed the downward trend in prevailing business confidence that has persisted for some time. Moreover, it said the anticipated level of optimism rises for rest of the survey period to 63 percent over the next 12 months.
Confidence among domestic-oriented businesses is 46 percent, higher than 39 percent in the previous survey. According to the report, this is consistent with generally positive growth prospects together with, possibly, rising optimism that the improving government budgetary position could allow for increases in public spending to the benefit of local businesses. There has also been an
increase in current confidence levels of export-oriented businesses, from 33 percent to 88 percent, a significant rebound, which indicates growing confidence in export markets.
Expectations on economic growth are relatively strong. On average, businesses expect real GDP to grow by 4.9 percent in 2014 and 5.2 percent in 2015, according to the survey. This is understood to be in line with the Budget Strategy Paper for 2015/16.
“As was the case in the March 2014 survey, most businesses continue to be optimistic about the continued demand for their products/services in the current period. Hence, businesses generally expect improvement in volume of sales, volume of goods imported and profitability between the two surveys,” it stated.
On the other hand, the level of optimism of businesses appears guarded with respect to production, employment and expected volume of goods exported, as indicated by the lack of a discernible pattern in the direction of expectations. However, the survey indicated that the level of optimism increases significantly in the future periods compared to the current period with respect to most of the above indicators. In line with this, the survey also indicates that a large majority of respondents expect to operate at above 50 percent of their productive capacity in the current period. Thus, the current levels of capacity utilisation by businesses are comparable with those in the earlier survey.
As inflation expectations remain within the Central Bank’s objective range, businesses are understood to have revised their inflation expectations slightly upwards to an average of 5.8 percent from 5.7 percent in the March 2014 survey, and to 6.1 percent from 5.9 percent for 2015. Nevertheless, the survey said a significant proportion of respondents (71.7 percent) expect inflation to be within the inflation objective in 2014 and 58.3 percent in 2015. This is broadly similar to the March survey, with the high levels of confidence that the objective will be achieved possibly a result of the sustained period during which inflation has been in the objective range, adding to the bank’s policy credibility.