Business Confidence IndexAugust 2009 |
The Business Confidence Index fell sharply in August, dropping to 85 points. The 13.6% fall on the July figure brings a halt to the steady climb recorded over the previous three months.
Although improvements in certain economic variables, such as the price of petroleum and a slowing inflation rate had boosted business confidence during previous months, the tax reforms sent by the Executive to the National Assembly have caused uncertainty in business circles. Rather than being viewed as a means of strengthening the economy’s business and productive conditions, the measures have been interpreted by some as a mechanism to ease pressure on the country’s financial situation
Principal aspects of the proposed reforms include:
• Levying income tax on dividends
• Converting the minimum prepaid income tax into an established non-returnable tax
• Levying 12% VAT on services received from overseas
• Levying 12% VAT on news paper imported for printing purposes
• Increasing excise duty on carbonated and alcoholic beverages
• Increasing the overseas remittance tax from 1% to 2%
On the economic front, the International Monetary Reserve closed August at US$3,962 million, US$810 million up on the July figure. However, notwithstanding swelling reserves and increasing oil prices, the country’s economic conditions have obliged the Executive to take measures such as pre-selling oil in an effort to increase flows of foreign exchange and thereby ensuring sufficient funds to cover investment plans and public spending budgets. 30% of those interviewed agree with the decision to pre-sell oil.
Despite these measures, 64% of surveyed executives are less optimistic with respect to the economy than in July, with the forecast slow-down in GDP growth from last year’s 3.5% to 1% in 2009 undoubtedly being a key factor.
Furthermore, 70% of those surveyed do not believe that the country’s socio-economic conditions are conducive to encouraging increased foreign direct investment.
Questioned on other matters, 30% of businessmen and women believe that the inflation rate for the month will be up on the previous figure, with the industrial and commercial sectors being most convinced.
With respect to business performance, 38% of executives have reported decreased sales during the past month, with 40% reporting declining year-on-year sales.
Business Confidence Index August 2009
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