Firms see Covid recovery by June
Mbongeni Mguni | Friday August 14, 2020 12:33
A recent survey of 100 businesses in several sectors by the Bank of Botswana (BoB) estabilsihed that from the crisis brought on by the pandemic in the first half of the year, many expected conditions to begin improving from the third quarter of the year, with a recovery by June 2021.
The central bank conducts a quarterly Business Expectations Survey through which information is collected on the domestic business community’s perceptions about the prevailing state of the economy and prospects.
According to the latest survey, covering the second quarter of the year, while firms are currently pessimistic, those in the manufacturing, water and electricity sectors lead domestic-focussed companies’ confidence in improved business conditions from the third quarter going forward. Amongst export-oriented businesses, those in mining and quarrying expect to increase output from the third quarter forward, as trading conditions improve.
However, the firms hardest hit by the pandemic, which include those in trade, hotels and restaurants sector as well as transport and communications, are pessimistic about the third quarter of 2020, but more optimistic about recovery by June 2021.
“Firms across all sectors are optimistic about economic recovery in the twelve month period to June 2021, led by the mining and quarrying sector,” BoB researchers noted.
“The level of optimism amongst domestic market-oriented firms improves markedly in the third quarter of 2020 compared to the second quarter of 2020. “It improves further in the twelve-month period to June 2021 in line with the anticipated economic recovery in 2021.”
According to the survey, part of the confidence is supported by the belief amongst firms that the cost of doing business will decline going forward. Firms expect costs such as wages, transport, rent and materials to decline in the third quarter, supporting recovery.
The positive outlook for costs is also partly reflected in firms’ expectations that inflation will average 3.2 percent this year and 3.4 percent next year. Inflation is currently at an all-time low of 0.9% and the BoB has said it expects inflation to return to the three to six percent medium term target range by the third quarter of 2021.
The survey noted that while most firms said they had benefited from government’s COVID-19 wage subsidy, only a few had accessed other relief measures such as tax concessions, VAT refunds, bank loan repayment holidays and expedited government purchase orders.
“It is not clear why survey respondents failed to take advantage of other benefits, since no reasons were provided,” the BoB said.
Government instituted a total travel ban in March and initiated a national lockdown in April and May as a response to the coronavirus. Subsequent lockdowns targeting outbreaks in Greater Gaborone have further impacted business activity.