Sunday, January 24, 2021

Business confidence remains high over possible economic boom

Botswana’s business confidence for the first half of this year remained bullish as investors are hoping for a strong growth in the economy of the country, a Bank of Botswana survey stated last week.

According the survey conducted last year, “confidence level” in the economic growth improved markedly for the first half of 2008 as 80 percent of the people interviewed believed that the economy would be in good shape during the first half of the year while 85 percent expressed confidence over the 12 months period.

“As with the previous survey, a high level of confidence now seems well entrenched among locallyÔÇôorientated firms, at 77 percent ÔÇô up from 73 percentÔÇöfor the second half of 2007 and rising to 85 percent and 87 percent for H1 2008 and 2008 as a whole,” the report said.

“It is probable that confidence among these firms has been heightened by the evidence that measures put in place by the government to improve implementation of spending programmes are starting to take effect,” it added.

However, confidence among exporters has fluctuated over the survey periods. These have been influenced by a number of factors such as the recent policy tightening in South Africa, the continued turmoil in international financial markets, and uncertainly over future international trade arrangement.

The survey indicated that business confidence is also reflected in the general satisfaction regarding business conditions with 71 percent satisfaction rate in H2 2007 which rises to 80 percent and 85 percent in H1 2008 and the entire year, respectively.

“In some other sectors, such as trade and finance, satisfaction levels were even higher. Consistent with this positive outlook in business conditions, positive net balances indicate anticipated improvements in key indicators, including production levels, volumes of sales and profitability,” the survey added.

However, the business community is wary of the rise in input costs which will be largely driven by a high appetite for raw materials in South Africa as it builds up to meeting the 2010 World Cup target.
“The increased demand for materials, especially in South Africa, fuelled by the needs of the massive projects being undertaken in preparation for the 2010 World Cup, are likely to be the major factors underlying these sentiment,” the survey said, adding that “expectation of rising transport costs are also very high.”

“On the contrary, the business community believes that demands for higher salaries will be restrained but thinks that they are on the verge of an economic boom,” it stated. “Despite the anticipated boom in economic activity and the possibility that the outcome of the just completed salaries review might result in an upward pressure on the private sector wages.”

Moreover, the report shows that the level of employment is expected to increase with net balances of 48.7 percent in the first half of this year and 34.5 percent over the next twelve months.
It further stated that rentals are set to go over the roof and pointed out that debt and financing domestic lending rates are unlikely to go up in the first half of the year but might also go up during the second half.

Regarding interest rates in South Africa, the report said that the expectations of increased borrowing costs will be much higher throughout 2008.

According to this report, inflation expectations persist at above eight percent.

Reflecting concerns about rising input costs, notably oil prices, the report stated that inflation expectations currently appear to be entrenched above the upper end of both the Bank’s short-and medium-team objective ranges.

Monetary policy is also expected to remain tight during 2008.

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