Maldives: Quarterly Business Survey Vol 8: Issue 1 June 2020

Transcription

1. M A L D I V E S M O N E T A R Y QUARTERLY BUSINESS SURVEY SECOND QUARTER 2020 VOLUME 8 ISSUE 1 A U T H O R I T Y
2. ABOUT THE SURVEY The Quarterly Business Survey is carried out by the MMA with the aim of obtaining a quick assessment of current business trends and expected future economic activity . The respondents of the business survey are senior managers or top management of businesses who have an overall view of the business situation. The questions cover the views of the senior management (for the past quarter and expectation for the next quarter) on the direction of change in various business variables such as sales, output, prices, capacity utilisation and employment which are useful for analysing and predicting economic activity. The qualitative response for these questions takes the form of either increase, decrease or no change. The business survey for the second quarter of 2020 was carried out from 28 June 2020 to 14 July 2020. Survey forms were sent electronically to 163 large enterprises (based on revenue) in the construction; tourism; and wholesale and retail trade sectors. The survey sample is taken from a list of companies provided by the Maldives Inland Revenue Authority (MIRA). A total of 93 enterprises responded during the survey period which represents an overall response rate of 57%. The qualitative responses to the survey are converted to quantitative numbers by subtracting the percentage of respondents reporting an increase from the percentage of respondents reporting a decrease. All responses are weighted based on their relative size (using revenue) within their respective sector. Care should be taken when interpreting the results of individual sectors since constraints in sample selection may limit the representativeness of certain industries within each sector. The MMA would like to thank all the parties who contributed to the survey, especially the survey respondents and MIRA. Prepared by: Research Division, Maldives Monetary Authority Tel: (960) 332-8028 Fax: (960) 331-7604 Email: surveys@mma.gov.mv Website: www.mma.gov.mv QUARTERLY BUSINESS SURVEY, Q2-2020 | 1 MALDIVES MONETARY AUTHORITY
3. KEY POINTS • According to the Quarterly Business Survey1 carried by the MMA from 28 June 2020 to 14 July 2020, businesses in the tourism, construction and; wholesale and retail trade reported an unprecedented decline in activity in Q22020, due to the COVID-19 pandemic and the lockdown measures imposed to contain its spread. • Employment levels declined considerably, which was more excessive in the tourism sector, as businesses reacted to the sharp fall in revenue stemming from the decline in demand and temporary closure of business, with cost cutting measures. • With the easing of lockdown measures in June and the reopening of borders in mid-July, as the country entered a period of phased easing, businesses in the tourism and construction sectors expect activity to improve in Q3-2020, relative to Q2-2020. In contrast, three quarters of businesses in wholesale and retail anticipate a further decline in sales going forward. • As there is a high level of uncertainty surrounding the path of the COVID-pandemic and the economy, the outlook for Q3-2020 appears to be pessimistic, in general, due to an anticipation of a further decline in orders, while resort bookings is expected to improve only slightly, relative to expectations in Q1-2020. • Both input prices and prices charged declined in tourism and; wholesale and retail, while it continued to increase in construction. Going forward, there is an anticipation of a continued increase in prices among businesses in construction, while prices are expected to turn positive in wholesale and retail as well. • The financial situation of the businesses worsened significantly in Q2-2020, which was more acute in tourism, the sector hardest hit by the COVID-19. More than two thirds of respondents from tourism expect the situation to further worsen in Q3-2020. • Access to credit further tightened in Q2-2020, more significantly for businesses in tourism and; wholesale and retail—more than half of businesses in these two sectors expect credit conditions to remain tight in the third quarter as well. The Quarterly Business Survey is carried out by the MMA with the aim of obtaining a quick assessment of current business trends and expected future economic activity. In Q2-2020 survey forms were sent to 163 large enterprises (based on revenue) in the construction; tourism; and wholesale and retail trade sectors. The survey sample is taken from a list of companies provided by the Maldives Inland Revenue Authority (MIRA). A total of 93 enterprises responded during the survey period which represents an overall response rate of 57%. 1 2 | QUARTERLY BUSINESS SURVEY, Q2-2020 MALDIVES MONETARY AUTHORITY
4. TOURISM CURRENT SITUATION Activity in the tourism sector came to an abrupt halt in Q2-2020 , as reported by executives from tourism businesses responding to the survey. This decline in Q2-2020 was evident relative to Q1-2020, and, relative to Q2-2019. In particular, the seasonally unadjusted2 indexes for total revenue and resort bookings declined 100 points in Q2-2020, relative to Q1-2020, as all businesses reported declines for these indicators. While tourism sector indicators are subject to a high level of seasonal variations, the sharp contraction in activity in Q2-2020 almost entirely reflects the closure of the country’s international borders on 27 March 2020 amid the global outbreak of the COVID-19 pandemic. The employment index declined further in Q2-2020 to -74, indicating layoffs, with only 26 percent of businesses reporting no change in employment levels. Similarly, the index for wages and other labour costs also fell sharply by 75 points to -78 in Q2-2020, signaling salary reductions, with only 20 percent of businesses reporting no change in wages and other labour costs. room rates was much larger, turning from a positive 20 in Q1-2020 to -98 in Q2-2020. The index for capital spending, which fell below zero in Q1-2020, fell further to -68 in Q1-2020. EXPECTATIONS FOR THE NEXT QUARTER Looking ahead, with the re-opening of the country’s international borders on 15 July 2020, businesses in the tourism sector expect revenues to increase in Q3-2020 relative to Q2-2020, as indicated by the turnaround in the expected revenue index for Q3-2020, from -28 to 13. The expected bookings index improved 27 points but stayed below zero at -1. However, given the high level of uncertainty surrounding the path of COVID-19 pandemic, with border restrictions in place for travellers originating from a number of tourism source markets for Maldives, the expected indexes for employment, wages, capital spending, the financial situation of the company and the overall business situation became more negative, suggesting a pessimistic outlook for Q3-2020. The index for input prices or prices paid by tourism businesses dropped to -57, while the decline in average Tourism activity in the Maldives is subject to a high level of seasonality (although in recent years this has lessened due to changing market composition of the industry), with tourist arrivals peaking during December to March, while the lowest number of arrivals are recorded during May to July which is traditionally considered as the off-peak season of the industry. Since the responses for the tourism sector in the quarterly business survey are not seasonally adjusted, care should be taken when interpreting quarterly changes as this would reflect effects of both the underlying changes and seasonal effects. 2 QUARTERLY BUSINESS SURVEY, Q2-2020 | 3 MALDIVES MONETARY AUTHORITY
5. Table 1 : Tourism SeDtor Views on the Direction oG Change in Business Indicators Current Situation (Q2-2020 vs. Q1-2020) Indicator Total revenue Resort bookings Number of employees Average room rate Wages and other labour costs per employee Input prices Capital expenditure Access to credit Financial situation of the company Overall business situation Q1-2020 Q2-2020 Index 0 -19 -35 20 -3 -6 -49 -17 -8 -13 Index -100 -100 -74 -98 -78 -57 -68 -73 -95 -100 Q1-2020 Q2-2020 Index -28 -28 -14 -28 -15 -13 -24 -11 -21 -26 Index 13 -1 -39 -16 -47 -10 -44 -67 -49 -42 Change -100 -81 -39 -118 -75 -51 -19 -56 -87 -87 Percentage of Respondents Reporting Increase/ Decrease/ Better/Ease No change Worse/Tight 0 0 100 0 0 100 0 26 74 0 2 98 1 20 79 12 19 69 2 28 70 0 27 73 0 5 95 0 0 100 Change 41 27 -25 12 -32 3 -20 -56 -28 -16 Percentage of Respondents Reporting Increase/ Decrease/ Better/Ease No change Worse/Tight 38 37 25 29 41 30 9 43 48 27 30 43 6 41 53 23 44 33 11 34 55 1 31 68 18 15 67 21 16 63 Expectations (Q3-2020 vs. Q2-2020) Indicator Total revenue Resort bookings Number of employees Average room rate Wages and other labour costs per employee Input prices Capital expenditure Access to credit Financial situation of the company Overall business situation Notes: (1) Index is calculated as the percentage of respondents indicating a positive result (increase/better/ease) minus the percentage of respondents indicating a negative result (decrease/worse/tight). (2) Responses are weighted based on the size (total revenue) of the business. (3) Data are not seasonally adjusted. (4) Survey results are based on responses received from June 28, 2020 to July 14, 2020. 4 | QUARTERLY BUSINESS SURVEY, Q2-2020 MALDIVES MONETARY AUTHORITY
6. CONSTRUCTION CURRENT SITUATION Activity in the construction sector declined significantly in Q2-2020 , as reported by executives from construction businesses responding to the survey. The volume of construction activity index plunged 76 points, from 15 in Q1-2020 to -61 in Q2-2020, its lowest reading recorded. The volume of orders index, which fell below zero in Q1-2020, further declined to -16 in Q2-2020, suggesting a continued weakening of orders. The employment index also fell 46 points , from 2 to -44 in Q2-2020, while the wages and other labour costs index remained close to zero, declining from 1 in Q12020 to -1 in Q2-2020. EXPECTATIONS FOR THE NEXT QUARTER Most businesses expect construction activity to improve in Q3-2020. The index for the expected volume of construction activity increased to 19, with 45 percent of respondents expecting an increase in Q3-2020 compared to 26 percent expecting a decline, as ongoing projects are expected to resume following the easing of lockdown measures in June. This is also reflected by the slight improvement in the expectation for employment levels , wages and other labour costs in Q3-2020. Nonetheless, there appears to be a high level of pessimism among businesses, as indicated by a further deterioration in the expected index for new orders to -20, and the continued declines in capital expenditure and the overall business situation. The index for input prices rose 33 points to 40 in Q22020 (with only 3 percent of respondents reporting a decline), and the prices charged index rose 25 points to 25, signaling price pressures. QUARTERLY BUSINESS SURVEY, Q2-2020 | 5 MALDIVES MONETARY AUTHORITY
7. Table 2 : Construction Sector Views on the Direction oG Change in Business Indicators Current Situation (Q2-2020 vs. Q1-2020) Indicator Volume of construction activity Volume of orders (contracts) received Number of employees Prices charged on average Wages and other labour costs per employee Input prices Capital expenditure Access to credit Financial situation of the company Overall business situation Q1-2020 Q2-2020 Index 15 -9 2 0 1 7 -29 -28 -35 -16 Index -61 -16 -44 25 -1 40 -25 -31 -41 -66 Q1-2020 Q2-2020 Index -4 -4 -3 2 -2 8 -3 -7 -7 1 Index 19 -20 4 46 3 60 -19 -38 -7 -31 Change -76 -7 -46 25 -2 33 4 -3 -6 -50 Percentage of Respondents Reporting Increase/ Decrease/ Better/Ease No change Worse/Tight 0 39 61 0 84 16 1 54 45 30 65 5 0 99 1 43 54 3 20 35 45 4 61 35 0 59 41 0 34 66 Change 23 -16 7 44 5 52 -16 -31 0 -32 Percentage of Respondents Reporting Increase/ Decrease/ Better/Ease No change Worse/Tight 45 29 26 1 78 21 29 46 25 50 46 4 5 93 2 61 38 1 21 39 40 0 62 38 29 35 36 16 37 47 Expectations (Q3-2020 vs. Q2-2020) Indicator Volume of construction activity Volume of orders (contracts) received Number of employees Prices charged on average Wages and other labour costs per employee Input prices Capital expenditure Access to credit Financial situation of the company Overall business situation Notes: (1) Index is calculated as the percentage of respondents indicating a positive result (increase/better/ease) minus the percentage of respondents indicating a negative result (decrease/worse/tight). (2) Responses are weighted based on the size (total revenue) of the business. (3) Data are not seasonally adjusted. (4) Survey results are based on responses received from June 28, 2020 to July 14, 2020. 6 | QUARTERLY BUSINESS SURVEY, Q2-2020 MALDIVES MONETARY AUTHORITY
8. WHOLESALE AND RETAIL TRADE CURRENT SITUATION Wholesale and retail sector sales plunged in Q2-2020 , as reported by executives from wholesale and retail businesses responding to the survey. The sales index fell sharply by 78 points, from -21 in Q1-2020 to -99 in Q2-2020, while the index for volume of orders placed with suppliers plunged by 81 points, from -10 to -91 in Q2-2020. The COVID-19 had massive impact on wholesale and retail sector due to stringent movement restrictions and the lockdown measures imposed by the government, which brought some businesses to a halt for weeks. Indicators for employment pointed to further layoffs with the employment index declining to -34 from -28 in Q1-2020. The wages and other labour costs index also fell further, to -36 in Q2-2020, recording negative readings for two consecutive quarters. Both the input prices and average selling prices index continued to fall in Q2-2020. situation of the company and the overall business situation reported large declines in Q2-2020, with more than three fourth of businesses surveyed reporting a worsening. EXPECTATIONS FOR THE NEXT QUARTER In general, the expectations of businesses in wholesale and retail trade for the next quarter appear to be pessimistic. Although the indexes for expected sales and expected orders remained negative, more businesses in wholesale and retail seem to be having either an optimistic or pessimistic view regarding the outlook for Q3-2020, as the number of businesses indicating no change declined dramatically. The index for the expected input prices further increased, with more than half of the businesses anticipating an increase, while the index for average selling prices turned positive and rose to 10. Other indexes for the sector, such as access to credit, financial situation of the company and the overall business situation became more negative compared to Q22020, with results pointing towards a bleaker outlook for the sector. Input prices index fell from -5 to -34, while the index for average selling prices declined from -20 to -32. Other business measures, such as the indexes for the financial QUARTERLY BUSINESS SURVEY, Q2-2020 | 7 MALDIVES MONETARY AUTHORITY
9. Table 3 : WholeTale and Retail Trade SeDtor Views on the Direction oG Change in Business Indicators Current Situation (Q2-2020 vs. Q1-2020) Indicator Total volume of sales Volume of orders placed with suppliers Volume of stock Number of employees Average selling price Wages and other labour costs per employee Cost of sales Capital expenditure Access to credit Financial situation of the company Overall business situation Q1-2020 Q2-2020 Index -21 -10 40 -28 -20 -7 -5 21 -45 -30 -12 Index -99 -91 -19 -34 -32 -36 -34 -15 -64 -80 -85 Q1-2020 Q2-2020 Index -3 -11 0 -4 -2 -4 7 -4 -16 -11 -4 Index -6 -21 -18 -11 10 -5 40 -4 -54 -24 -17 Change -78 -81 -59 -6 -12 -29 -29 -36 -19 -50 -73 Percentage of Respondents Reporting Increase/ Decrease/ Better/Ease No change Worse/Tight 0 1 99 0 9 91 23 35 42 7 52 41 2 64 34 5 54 41 16 34 50 14 57 29 0 36 64 2 16 82 1 13 86 Change -3 -10 -18 -7 12 -1 33 0 -38 -13 -13 Percentage of Respondents Reporting Increase/ Decrease/ Better/Ease No change Worse/Tight 43 8 49 29 21 50 17 48 35 15 59 26 28 54 18 18 59 23 54 32 14 13 70 17 2 42 56 20 36 44 39 5 56 Expectations (Q3-2020 vs. Q2-2020) Indicator Total volume of sales Volume of orders placed with suppliers Volume of stock Number of employees Average selling price Wages and other labour costs per employee Cost of sales Capital expenditure Access to credit Financial situation of the company Overall business situation Notes: (1) Index is calculated as the percentage of respondents indicating a positive result (increase/better/ease) minus the percentage of respondents indicating a negative result (decrease/worse/tight). (2) Responses are weighted based on the size (total revenue) of the business. (3) Data are not seasonally adjusted. (4) Survey results are based on responses received from June 28, 2020 to July 14, 2020. 8 | QUARTERLY BUSINESS SURVEY, Q2-2020 MALDIVES MONETARY AUTHORITY
10. MALDIVES MONETARY AUTHORITY Boduthakurufaanu Magu Male ’ - 20182 Republic of Maldives Tel: (960) 3312343 Fax: (960) 3323862 Email: mail@mma.gov.mv Website: www.mma.gov.mv