Domestic companies upbeat despite lingering Corona Virus
Businesses are optimistic about economic recovery in a twelve- month period with mining and quarrying sector taking the lead. According to the Business Expectations Survey ( BES) conducted by Bank of Botswana, firms expect output to be zero growth this year, which is an improvement over the 0.2 percent contraction predicted in the June 2020 survey and a more optimistic view compared to the projected 8.9 percent contraction by Ministry of Finance and Economic Development. The BES samples 100 businesses from eight economic sectors, namely: agriculture; mining; manufacturing; water and electricity; construction; trade, hotels and restaurants; transport and communications as well as finance and business services. The response rate for the current survey is 75 percent, 2 percent higher than the response rate in the June 2020 Survey. On quarterly basis, firms expect GDP to contract in the third quarter of 2020, consistent with the anticipated decline in production; sales; profitability; exports and imports of goods and services; and investment in buildings, vehicles and equipment, plant and machinery, and ‘ other’ investments. The survey also highlights that further; COVID- 19 containment measures have negatively affected business operations in the third quarter of 2020. The most affected firms are largely in the trade, hotels, restaurants, transport and communications1; mining and quarrying; finance and business services, and the manufacturing sectors. In general, firms anticipate that it will take more than a year, from September 2020, for their businesses to recover from the impact of COVID- 19. While firms are optimistic about recovery next year, the mining and quarrying sector, which predominantly targets the export market, expects a decline in activity in the third quarter of 2020 due to unfavorable market conditions and weaker global demand for rough diamonds associated with the interruption of trading due to the COVID- 19 pandemic containment measures. “However, the sector is also less pessimistic compared to the second quarter. The mining, trade, hotels, restaurants, transport and communications and manufacturing sectors are optimistic about economic performance in the fourth quarter of 2020, while the rest of the sectors are pessimistic.” The reduced level of pessimism reflects the anticipated lower contraction in production; sales; profitability; exports and imports of goods and services; and investment in buildings, vehicles and equipment, plant and machinery, and other indicators in the current survey compared to the previous one. The expected relative improvement in business conditions is in line with the anticipated recovery in global economic activity associated with the gradual easing of COVID- 19 pandemic containment measures. Firms expect the economy to be stagnant in 2020, while inflation is anticipated to average 3 percent and 3.3 percent in 2020 and 2021, respectively. The majority of the surveyed firms indicated that COVID- 19 containment measures have negatively affected business operations in the current period. However, businesses anticipate to recover from the impact of the pandemic in more than a year from September 2020. However, access to credit was anticipated to be tight across all markets. Meanwhile, firms expect cost pressures to rise in the fourth quarter of 2020, mainly reflecting the anticipated increase in cost of transport. Firms also expect inflation to remain stable and within the Bank’s medium- term objective range of 3 - 6 percent in 2020 and 2021.