Following a period of heightened optimism and strong economic growth, the outlook for businesses in 2019 is markedly more reserved as the global economic cycle cools and political uncertainty begins to bite, according to the latest research from Grant Thornton’s International Business Report (IBR).
The research, which gathers responses biannually from 5,000 business leaders in 35 economies including the G20, found that Global optimism is now sitting at 39%, a significant fall from 54% last quarter while Botswana’s optimism is now sitting at net 62%, a drop compared to last quarter’s 70%.
The research shows that 46% of businesses in Botswana are very optimistic, 28% are slightly optimistic, 14 % are neither optimistic nor pessimistic, while only 8% are slightly pessimistic and 4% are very pessimistic for the outlook of the country’s economy over the next 12 months. According to the research, Botswana’s 62% optimism is significantly higher than the average African outlook (41%) as well as neighbouring country South Africa’s outlook (27%).
However, it’s not all bad news and despite the spike in uncertainty, over 60% of research respondents were either optimistic or very optimistic about the future. This is reflected in export expectations with only 11% expecting a decrease and 84% of leaders expecting revenues to either stay the same or increase.
Revenue increase expectation in Botswana remains the same as last quarter at 74% while in South Africa 69% are expecting an increase in revenue compared to last quarter’s 54%. Although, economic uncertainty is identified by business leaders as the biggest risk and constraint to the growth of their business, peaking globally and locally at 50% and 52% respectively.
Revenue expectations are in sharp decline at net 41%, down from net 59% and profitability expectations also took a hit, down globally at net 39%, a decrease of 9%. Kalyanaraman Vijay, Managing Partner, Grant Thornton Botswana: “While global financial markets are increasingly volatile, business leaders in the real economy remain optimistic because global GDP is forecast to continue growing and they know their business will grow with it.
Despite increasing down side risk, economic fundamentals remain strong and opportunities exist.” He further highlights, “Traditionally, in times of economic uncertainty, additional expenditure and investment seems counter-intuitive and many businesses tend to shore up their operations and significantly reduce or cease investment. However, this is a time when investing in capabilities and infrastructure can pay dividends and, when the economy turns, prudent businesses can react with speed to take advantage.”
As the economic cycle cools, it’s clear that business globally won’t have it as good as they did in 2018. However, with the IMF predicting global economic growth of 3.7%, predictions of a recession are the exception rather than the rule. What we are seeing is a return to normality with more balanced and sustainable growth for economies.
This article appeared in Weekend post online 04th February, 2019.