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THE ISSUE (ON THE RIGHT): Negative balance for first quarter

Shawn Cumberbatch

THE ISSUE (ON THE RIGHT): Negative balance for first quarter

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Is Barbados and the world witnessing a resurgence in business confidence?

Business confidence is a unique gauge of economic activity. It is the measurement of what business owners and executives think is going to happen in the future. Therefore, business confidence reports are one of the few forward looking data sets available to members of the business community.

Business confidence reports therefore represent an important source of information for businesses. Because of the uncertainty involved, it is strongly recommended that a variety of information sources be utilised by both the business community and policy makers for more effective decision making.

The latest results of the Business Outlook 2015 quarter two show that businesses are still experiencing tough times.

As a result, overall economic activity continues to struggle in the face of multiple challenges currently facing businesses.

Firms are bearish about their own employment prospects and a significant portion view access to credit as getting harder over the next 12 months.

Though the low response in 2015 quarter one makes it difficult to deliver meaningful comparisons for individual confidence indicators, we can still review the overall business [climate] with some degree of confidence. The overall business confidence of 2015 quarter two is still negatively balanced and estimated at -10 per cent compared to -16 per cent during the first quarter of 2015.

Of the 21 indicators for which the next balance is calculated, only four registered positive measures of confidence, which are: general business conditions in the next 12 months (+11 per cent), real business activity in 12 months’ time (+12 per cent), price of good/service in three months’ time (+19 per cent), and volume of activity in non-residential construction in 12 months’ time (+four per cent).

These four indicators fall in the balanced category and is not sufficient to offset the negative confidence levels of the other 17 indicators to reach positive territory overall.

Interestingly, the monetary policy announcement by the Central Bank of Barbados at the beginning of the survey period did not appear to have any significant influence on the responses as it relates to interest rates on loans and overdrafts and the relative ease of accessing credit in general.

Only ten per cent expected lower interest rates on overdrafts in 12 months’ time, whilst 21 per cent expect rates of loans to decrease.

Some 86 per cent also expected that it’ll be harder to access credit in 12 months’ time (44 per cent) whilst 42 per cent expected access to remain the same.

On the bridge side, firms are much more positive and upbeat about the future, with 36 per cent of business owners and executives expecting stronger trading levels over the next six months.

Only 20 per cent expect a weaker performance over the next six months.

For there to be a significant growth in the economy this year, this optimism must be translated into improvement in real business activity, which should be accompanied by the higher employment levels. The budgetary and financial statement of the Government is expected to be delivered [on June 15], which follows the Estimates of Revenue and Expenditure laid in Parliament in March.

We will have to wait for the results of the next survey to see if the optimism of some businesses is realised or if continued fiscal pressures further challenge the Barbados economy.

ABELIAN conducted its business survey in partnership with the Barbados Chamber of Commerce and Industry between April 7 and April 20.