Business confidence drops ahead of elections

Results are largely influenced by pessimism in retail and wholesale trade

KARACHI: Overall business confidence in Pakistan has dropped by seven percentage points, standing at 14%, according to the Business Confidence Index (BCI) Survey - Wave 16 recently launched by the Overseas Investors Chamber of Commerce and Industry (OICCI).

In Wave 15, launched in November 2017, the business confidence in Pakistan stood at 21%. The survey results were largely influenced by pessimism in retail and wholesale trade, which recorded a sharp decline in business confidence to 6% compared to 40% in Wave 15.



Confidence of the manufacturing sector was stable at 15% while the services sector was bullish at 23% against 15% in the previous survey.

“The significant decline in business confidence is not surprising considering that the country has had many challenges over the past six months,” OICCI Secretary Abdul Aleem told The Express Tribune. He pointed out that Malaysia, which was also going through a similar political phase, might also be having roughly similar index numbers.

Insight Securities Head of Research Zeeshan Afzal said the index would usually drop in an election year, but weak economic conditions and chances of economic slowdown had also played their part.



OICCI President Bruno Olierhoek was of the view that Pakistan was facing a balance of payments crisis, political uncertainty and related media hype on non-economic issues, decline in foreign exchange reserves and significant weakening of the exchange rate.

Pakistan had also been included in the FATF grey list for alleged failure to curb terror financing together with regular concerns over Pakistan’s economy reported by the local and international media, he said.



The OICCI BCI survey, conducted every six months, is a comprehensive review of both local and global business aspects and is indicative of the direction in which the economy is headed. It is based on perceptions of key stakeholders of the business community that represents about 80% of gross domestic product.

Based on the respondents’ feedback, the decline in business confidence was mainly caused by a combination of significantly reduced perception of global, country and industrial business situation over the past six months and in the next six months as well as decreased level of anticipated capital investment, profitability and return on investment over the next six months.

Growing concerns over governance and government policies, inflation and security conditions together with pessimism about the future due to upcoming election-related political uncertainty and developing energy crisis were stated as leading reasons for the decline in business confidence.

Sentiments of leading foreign investors, represented by the OICCI, who were part of the survey, also showed a decline, albeit by only 4%, to 38% from 42%.

Despite an increase in the business confidence for Lahore and Rawalpindi, the overall score declined by 8% due to a drastic fall of 18% in the score of Karachi. The score for non-metropolis declined marginally by 3%.

Published in The Express Tribune, May 23^rd, 2018.

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