ISET researchers relate improvement of Georgia's Business Confidence Index to “Kvirikashvili Effect”

The Georgian Business Confidence Index (BCI) gained 3 points on a [-100/100 scale]) due to a dramatic strengthening of business expectations from 16 points in the fourth quarter of 2015 to 38 index points in the first quarter of 2016. “Kvirikashvili Effect”, which is how ISET researchers describe the improved index of Georgia.

According to them, during this time Georgia did not experience any major changes in the macroeconomic context, such a sharp advance in expectations can be best understood as a vote of confidence by the Georgian business community in Giorgi Kvirikashvili’s leadership.

“Indeed, the first months of Kvirikashvili’s term as Georgia’s PM were marked by a large number of pro-business initiatives targeting the Georgian tax code and tax administration. The Georgian government is developing proposals for very significant changes in a corporate taxation, abolition of VAT on imported capital goods, improvements in tax administration and insolvency regulation.

“In the quarter 4, 2015, the expected sales price reached its highest point. Indeed, annual inflation in January 2016 was 5.6%. New year period allowed the economy to adjust prices driven by exchange rate depreciation, and companies are not expecting further increase in sales prices.

“The most limiting factor for doing business is insufficient demand. SMEs typically have more trouble attracting financial resources than larger companies.

“Business confidence in the first quarter of 2016 slightly improved for large and declined for SMEs. Overall, the trend for large companies as well as SMEs is stable and positive,” claims ISET. (IPN)