19 Dec 2013

Business confidence remains low although some optimism still remains.

The latest business expectations survey from the Bank of Botswana says business confidence in the local economy remains low at 45 per cent, going down by two per cent from the March 2013 survey. “However, the level of optimism rose again for the first half of 2013 to 57 per cent to 64 per cent over the next 12 months,” reads the statement from the central bank.

It is reported that confidence among domestic-oriented businesses has held on to 49 per cent despite the ongoing challenges. The Bank of Botswana notes that it is consistent with the continued growth of the non-mining sectors indicated in the September GDP estimates and the positive outlook presented in the budget speech in February this year.

“In contrast, there has been a decline in the current confidence levels of export-oriented businesses from 44 per cent to 38 per cent, although, as much with those focused on the domestic market, there is a significant rebound in confidence later in the survey period, when export volumes are expected to increase.”

Businesses expect real GDP to increase by 4.3 per cent this year, with the same growth expected next year. This, according to the central bank, is significantly lower than the 5.9 per cent (revised downwards to 4.4 per cent in the recent budget strategy paper for 2014) indicated in the 2013 budget speech, but reflects more recent estimates of actual growth from Statistics Botswana.

The Bank of Botswana survey shows that firms are hesitant in their production objectives due to the prevailing uncertain economic environment. There are strong negative sentiments regarding rising costs of all inputs, including utilities, transport and wages.

It is said these sentiments could be due to anticipated increase in utility costs especially electricity and businesses may also consider the possibility of increase in salaries of civil servants given projected improvement in the government financial position.

The central bank states that there is increased appetite for additional borrowing from local and regional markets, despite the anticipated higher interest rates in regional financial markets. Inflation expectations continue to decline but remain outside the top end of the 3-6 per cent inflation objective.

The bank states that although the Point Based System (PBS) has been revised, the new criteria has not yet resolved the concerns of local businesses. ENDS