Business confidence high in 2010-Poll

Brian Benza
Staff Writer | Thursday January 7, 2010 00:00

 

In a summary report of the Business Expectations Survey(BES) conducted by the Bank of Botswana between September and November 2009 business confidence went up to 47 percent  and this will be maintained in the first half of 2010.

'There appears to have been a significant upturn in overall business confidence although it is still relatively low. The satisfaction with current business conditions has risen to 47 percent, and this is maintained for the first half of 2010. For 2010 as a whole, confidence rises to 59 percent. This suggests that businesses are now more confident in both domestic and international economic conditions,' reads the survey.

At the time of the previous survey between March and May last year only 40 percent regarded prevailing business conditions as satisfactory, while even fewer (26 percent) were optimistic about conditions in the next six months.

The survey samples 100 businesses in agriculture, mining, manufacturing, water and electricity, construction, trade, transport and banks, insurance and business services.

In terms of profits, the bank said that businesses feel that while expectations have also improved, the net balance is only marginally positive for second half of 2009, consistent with most businesses remaining dissatisfied with current conditions.

Looking ahead, businesses are not as optimistic about their levels of profits as the net balance has remained in the negative.

'Prospects for profits turn sharply negative again in the first of 2010, with a net balance of -39.9 percent.

'This is despite the greater optimism about improved conditions, and possibly underlines the extent to which there are lingering doubts about the extent of the current recovery.Here, there may be some anxiety that input costs are likely to start rising again.

In particular, expectations of price increases for raw materials and transport, which had net balances of -1.0 and -7.4 percent in the March survey, have risen sharply to 44.3 percent and 58.9 percent, respectively' says the report.

Among the businesses questioned, exporters were the most pessimistic of them all perhaps reflecting the continuing uncertainties regarding export markets with only 38 percent satisfied with the current business conditions as opposed to 49 percent of firms for which their main market is domestic.

However, in line with the more positive outlook, looking a year ahead there is a sharp recovery in the optimism of exporters to 63 percent, compared to 59 percent for domestic businesses.

'Overall, production is expected to fall in the current period, with a net balance of -58 percent, and then pick up in H1-2010, with a net balance of 49.7 percent.

'The same picture is reflected in sales where a negative net balance of -43.9 percent in the current period later becomes positive at 8.72 percent.

At the same time, stock is expected to rise in both second half of 2009 and first half  of 2010, consistent with firms' willingness to hold additional inventories as the market for their products continues to recover,' says the report.

For Gross Domestic Product (GDP), growth of 1.7 and 2.6 percent is expected for 2009 and 2010, respectively.

In terms of inflation businesses expect average inflation to be 9.6 percent and 10.2 percent in 2009 and 2010, respectively, in comparison to 10.2 percent and 10.5 percent, respectively, in the previous survey.

The sentiment that inflation would remain above the upper bound of the Bank of Botswana's medium term objective range in both 2009 and 2010 is held nearly universally by survey respondents.

'However, the extent of the downward adjustment remained modest in comparison to the observed trend in CPI inflation, where the average for the first ten months of 2009 was 8.8 percent,' says the report.