Wednesday, February 21, 2024

Global uncertainty weighs on resurgent business confidence

New research from the Grant Thornton International Business Report (IBR) reveals that while business confidence in 2014 climbed to levels not seen since before the financial crisis, a recent spate of uncertainty is weighing on growth prospects for the year ahead.
According to the report, with the price of oil plummeting, the future of the Eurozone still far from secure, tensions in Ukraine and concerns around the pace of the slowdown in China, the confidence of business leaders, especially in the world’s largest three economies, has slipped as the world enters 2015.
“Botswana falls among the top 10 countries in the emerging markets that are most optimistic about the economic outlook despite the uncertainty and general fall in business confidence the world over,” reads the report.
The IBR shows that global business optimism for 2014 stood at an average of 41 percent compared to 28 percent in 2013 and just 12 percent in 2012. Also in Q4, global optimism dropped from 43 percent to 35 percent driven by steep falls in the United states (down 10 percentage points to 59 percent), China (down 30pp to 25 percent) and Japan (down 12pp to -12 percent).
“Botswana followed suit to the major economies and experienced a drop in Q4 whereas South Africa stood at a low of 5 percent since its major drop in Q3 down 32pp to 3 percent in Q3,” reads the report.
Grant Thornton global leader for tax services Francesca Lagerberg is of the view that they saw the highest levels of business confidence since 2007 over the past 12 months. However, looking ahead, there are a number of potential flashpoints which are threatening global economic stability.
“The volatility in the oil price is of particular concern to global markets: prices dropped to five-year lows in December and while cheaper oil will benefit net importers and industries such as manufacturing and transport, it is already spelling trouble for energy companies and key markets such as Russia and the Middle East,” he said.
He is also of the view that the threat of recession and deflation in the Eurozone and Japan is also a massive concern. He stated that meanwhile, the Eurozone has barely grown in five years, unemployment remains stubbornly high and a change of party in Greece could reignite the sovereign debt crisis. With the slowdown in China, which is dampening demand for natural resources from Latin America and exports from Southeast Asia, it is clear that the outlook for 2015 is far from stable.
When assessing Botswana’s optimism, Partner at Grant Thornton Vijay Kalyanaraman said it is energising to see the optimistic outlook of Botswana relative to other countries.
“The relocation of Diamond Trading Centre (DTC) from London to Botswana has provided a huge boost in terms of confidence and expectations. With more than a year since this move, more has to be seen in actual ripple effects to other businesses and the economy as a whole,” he said.
He stated that government still remains the major driver for growth. The key to reflecting business optimism into reality, he said, is implementation of initiatives and easing of procedures involved in setting up or running businesses in Botswana, which will in turn make a positive difference.


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