Pakistan’s economic outlook at six-year high

KARACHI: Is this the best time to expand your business in Pakistan?

A latest survey conducted across the country at least says so.

According to the survey, the results of which have been released recently, the economic outlook in Pakistan is at a six-year high now and is continuously improving.

The survey titled the Business Confidence Index is a biannual assessment sponsored by the OICCI – an association that represents 196 multinationals operating in Pakistan – since 2010.



It says, “the business confidence in the country has improved to a positive 36% in the last six months (October 2015 to March 2016), up 14 percentage points compared to 22% in previous six months (April to September 2015).”

The survey results also show that the confidence level of foreign companies operating in the country was also at a positive 55%, a record high for the last six years.

Positives

So what has changed in Pakistan in the last six months that has improved the business confidence?

“Relative political stability, improving security situation, low inflation due to record low international oil prices and 42-year low interest rates are some of the factors that have created an atmosphere in the country in which investors are looking for investment opportunities,” says the survey.

“There has been a significant change in the business confidence in the last two years. After remaining literally stagnant for one and a half years (July 2013 to September 2014) at 1%, economic outlook has gradually improved to 36% in the last three half-yearly surveys.”



Negatives

Despite all these feel-good factors and improving macroeconomic indicators, Pakistan’s economy has yet to take off and it is not difficult to point out the factors that are pulling it back. Though security challenges have relatively waned, energy crisis is still strangling exports and causing a loss of at least one percentage point to the GDP annually.

Owing to weak domestic policies and slow world economic growth, Pakistan is not getting enough foreign direct investment (FDI).

The government is also facing stiff challenges to increasing tax revenues by eliminating structural flaws in the tax system. Just when the economic growth should be touching 6 to 7% to provide jobs to the growing workforce, the government is failing to take it to even 5%.

Political uncertainty

When the PML-N government came to power in mid-2013, there was much enthusiasm and confidence in the business community that was also reflected in the OICCI business survey of July 2014.

However, the confidence dropped significantly when opposition parties went for a sit-in in Islamabad that lasted four months and ended in December 2014.

Nobody knew the result of that political upheaval as people thought the government would eventually fall. It, however, sustained the onslaught but came out too weak to take prudent decisions to end perpetual anomalies in tax and other systems.



The current situation is not very different as the government is facing challenges in the wake of Panama leaks. The political point-scoring and differences in points of view of the government and opposition parties can never go down well among those who are carefully monitoring the situation, be it political or purely economic.

Companies, especially foreign ones, have little interest in the government. What they actually care about is political certainty and economic policies so that they can better plan their investments and profit margins.

Moreover, the already existing uncertainty among businesses could potentially affect new investments in the country. Regardless of what the situation turns out to be, it has all the heat to burn down the current enthusiasm of entrepreneurs, local and international.

If better sense does not prevail, it is ultimately Pakistan that will suffer.

The writer is a staff correspondent

Published in The Express Tribune, May 23^rd, 2016.

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