Business confidence declines in Pakistan
Businessmen are seen inside a high-rise office building. PHOTO: REUTERS
The Covid-19 added fuel to the pessimism among Pakistani businessmen, who had already been affected badly by the sluggish economy, reported the Overseas Investors Chamber of Commerce and Industry (OICCI) while citing its Business Confidence Index (BCI) Survey - Wave 19.
The OICCI shared results of its BCI Survey - Wave 19, which showed that the overall Business Confidence Score (BCS) in Pakistan stood at negative 50%, a further drop of 5% from the -45% score in the Wave 18 Survey conducted in August 2019.
“The huge scare caused by the pandemic came during a period when the country was already in the midst of a major economic stabilisation programme,” said OICCI President Haroon Rashid while commenting on the low BCS.
Since early 2019, with a significant devaluation of currency, a 38% decline had been observed in the past 12 months to June 2019 due to high State Bank of Pakistan’s (SBP) policy rate (13.25% in December 2019) and resultant high inflation impacting all businesses, he said.
“Therefore, the poor BCS in the last two surveys, despite being a matter of concern to all the stakeholders, is not surprising, in fact quite understandable, under the current challenging circumstances,” he added.
The latest BCI survey results reflect the continued pessimism across all sectors in general and particularly in the manufacturing and services sectors.
The BCS of the manufacturing sector, which represents about 42% of the respondents, declined by 5% over the past six months and stood at -48% compared to -43% in Wave 18.
However, the BCS of the services sector, representing 29% of the survey respondents, suffered a significant dip from negative 49% in Wave 18 to negative 59%.
The BCS of retail and wholesale trade remained unchanged at negative 44% in both Wave 18 and Wave 19 surveys. The results of the latest BCI survey, conducted across Pakistan from May to June 2020, were largely influenced by the Covid-19 pandemic, which has negatively impacted nearly all the businesses.
The prolonged uncertainty, due to the pandemic and strict lockdowns and other corrective measures taken by the authorities, impacted a large segment of business activities.
During the past six months, a majority of the respondents experienced a decline in their sales volume, profits and ROI and were unable to expand their business. However, for the next six months, the survey respondents are comparatively more positive.
One of the key factors affecting the overall sentiment was a poor view of the survey participants of the global business situation in the past six months (from -9% in August 2019 to -79% in May 2020), of Pakistan’s business situation (from -75% in August 2019 to -81% in May 2020) and survey participants’ own business situation (from -65% in August 2019 to -83% in May 2020).
As mentioned above, the BCS of the services sector recorded the highest net negative sentiment of 10% overall.
Major services sub-sectors, showing increasing negative confidence scores, were real estate (-78% versus -68%), community, social and personal sectors (-70% against -51%), transport and communication (-53% compared to -68%) and financial services (-37% versus -41%).
In the manufacturing sector, tobacco (-76% against -73% in October 2019), chemicals and cement (-58% versus -51%) and non-metallic (-38% in comparison to -35%) sub-sectors recorded declines while petroleum, oil and gas (-18% compared to -42% in October 2019), automobile (-52% versus -66%) and food (-40% against -55%) sub-sectors showed significant improvement in the current BCI Wave 19.
Sentiment of the OICCI members, who were randomly included in the survey, also recorded a sharp decline of 38%, from negative 36% in Wave 18 to negative 74% in the latest Wave 19, as opposed to the overall confidence scores, which declined from negative 45% to negative 50%.
In all the previous 18 BCI surveys conducted so far, the business confidence of foreign investors had remained much higher than their local counterparts included in the surveys.
The BCS in metropolitan cities has increased marginally by 3% (from -49% in August 2019 to -46% in May 2020) while it dropped 4% in non-metros (from -34% in August 2019 to -38% in May 2020).
The BCS score improved by 3% in Karachi (from -53% to -50%) while it dropped by 12-13% in Rawalpindi and Islamabad (from -47% to -59%) and in Lahore (from -41% to -54%).
The OICCI expects that various positive measures recently taken by the federal government and various initiatives undertaken by the central bank to support and sustain vulnerable stakeholders in the business and industry to successfully navigate the current economic challenges will bring positive results, stated Haroon Rashid.
Published in The Express Tribune, August 6th, 2020.
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