Friday, December 3, 2021

Here is what local firms think about the domestic economy

Businesses operating in Botswana are optimistic about economic activities though they expect prices to rise in the medium term, according to Bank of Botswana’s quarterly Business Expectations Survey (BES) for the third quarter, released on Monday.

The report collects information on the domestic business community’s perceptions about the prevailing state of the economy and expectations during the survey period.

The BES samples 100 businesses from thirteen economic sectors, namely: Agriculture, Forestry and Fishing; Mining and Quarrying; Manufacturing; Water and Electricity; Construction; Wholesale and Retail; Transport and Storage; Accommodation and Food Services; Information and Communications Technology; Finance, Insurance and Pension Funding; Real Estate Activities; Professional Scientific and Technical Activities; and Administrative and Support Activities.

“The response rate for the current survey is 55 percent, 15 percentage points lower than in the June 2021 Survey. The lower response rate was mainly due to the logistical challenges faced by some companies, arising from reduced staff complement and shift work arrangements necessitated by the COVID-19 containment measures,” the central bank said.

According to the survey’s findings, businesses are optimistic about economic activity in the third quarter of 2021 compared to the pessimism that prevailed in the second quarter.

Companies expect gross domestic product (GDP) to expand by 3.2 percent and 3.9 percent in the third and fourth quarters of 2021, respectively, and 4 percent, on an annual basis, in 2021.

“Growth expectations for the third quarter of 2021, are reflected in the anticipated improvement in performance of sectors such as mining and quarrying and manufacturing. At the same time, the expected fourth quarter growth aligns with the anticipated improvement in business conditions and the envisaged global economic recovery in 2021,” the report said.

The optimism is evident in the anticipated improvement in profitability, sales volume, imports of goods and services, and investment in plant and machinery.

However, businesses expect cost pressures to continue rising in the fourth quarter of 2021, mainly attributable to the expected increase in input costs, due to second-round effects of the upward adjustment of VAT, fuel levy and electricity tarriffs effected in 2021. Firms’ expectations about domestic inflation rose in 2021 and marginally surpassed the upper bound of the Bank’s 3 – 6 percent objective range. Firms’ inflation expectations averaged 6.1 percent in 2020 and 5.6 percet in 2022.

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