Business confidence slumps in Q3

BoB governor, Moses Pelaelo
BoB governor, Moses Pelaelo

The latest Bank of Botswana quarterly business expectations survey indicates that the level of optimism amongst local firms has gone down in the third quarter of this year.

According to the survey, businesses were less optimistic about economic activity in the third quarter of 2019 compared to the second quarter of 2019.

However, the survey suggests that most businesses believe business conditions are bound to improve in the fourth quarter of 2019, and become even better over the 12-month period to September 2020.

“This will be consistent with the anticipated improvements in capacity/resource utilisation, production service capacity, sales, stocks inventories and investment on plant and machinery as well as buildings,” the business confidence report reads. All sectors also believe the third quarter of 2019 will report weak GDP numbers.

Real GDP for the second quarter of 2019 came in at 3.1 percent year-on-year, compared to 4.3 percent in the first quarter, year-on-year.

“These prospective developments are mainly reflected in responses by firms in mining and quarrying as well as the finance and business services sectors.

“The weak performance in the mining and quarrying sector can be attributable to the negative impact of the heightened trade tensions between USA and China which adversely affecting the diamond market,” states the report.

The majority of businesses expected a decrease in exports of goods and services, profits and investment in buildings, plant and machinery, vehicles and equipment and other categories in the third quarter of 2019.

However firms intend to increase investment in buildings, plant and machinery and other categories in the fourth quarter of 2019, despite anticipating tight access to credit in the domestic market.

Meanwhile firms expect cost pressures to rise in the fourth quarter of 2019, mainly reflecting the anticipated upward pressure on costs of materials, wages and transport.

However they expect inflation to remain stable and within the central bank’s medium-term objective range of 3- 6 percent going forward.

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