BAG Index: Business Association of Georgia members’ expectations improved for next six months

Member businesses of the Business Association of Georgia (BAG) have assessed the present business situation negatively in the third quarter of 2020, while their expectations for the next six months are positive, says the BAG Index, which is a joint product of the BAG, PMC Research Center and the ifo Institute for Economic Research.

In Q3 of 2020, compared to Q2 of 2020, the BAG member businesses’ assessment of the present business situation worsened, while their business expectations improved. In the third quarter of 2020, the BAG Business Climate indicator is positive for all sectors except the service sector, trade and manufacturing sectors", reads the index.

Factors hindering business activity

With respect to the challenges that businesses face, in Q3 of 2020, 70.2 per cent of the surveyed businesses claimed that there are factors that hinder their business activity, while 29.8 per cent stated that no such factors affected them. 

In Q3 of 2020, these factors were named as the most hindering for business activity:

• Weak demand (named by 68 per cent)
• Legal and administrative barriers (named by 48 per cent)
• Lack of specialists
• Financial constraints
• Exchange rate expectations

In Q3 of 2020, compared to Q2 of 2020, the percentage share of the surveyed companies expecting currency depreciation increased from 41 per cent to 67 per cent. 

The percentage share of surveyed BAG members thinking that the exchange rate of the Georgian lari against the US Dollar will not change decreased sharply from 52 per cent to 28 per cent.

Judicial system

Legal and administrative barriers were cited as one of the main factors hindering business activity, with the judicial system highlighted by many as a sub-factor within this category. 

The respondents saw a need for improvement with respect to tightening deadlines (76 per cent) and increasing competence (57 per cent). A large proportion of respondents also think that the judicial system will improve as a result of the simplification of procedures and an increase of impartiality.

When asked about trust in the Georgian court system, only 18 per cent of the surveyed businesses indicated a high level of trust in Georgian courts, while 41 per cent indicated a low level of trust. Meanwhile, nine per cent of respondents said they had no trust in the Georgian judicial system, which is similar to the proportion of respondents who assessed the Georgian judicial system as ‘very inefficient’.