Business optimism among small enterprises declines

Major corporations, service sector remain optimistic of growth in their businesses

KARACHI:

Business optimism has declined among small and medium enterprises (SME) and exporters while major corporations and service sector of the country remain optimistic of growth in their business.

This was the conclusion of Dun and Bradstreet Pakistan’s fifth edition of the “Business Optimism Index” (BOI) report for the fourth quarter of 2020.

During the past five quarters, the index had remained above 100 representing positive sentiments among the business community. The BOI amounted to 133.5 points during the fourth quarter of 2020 compared to 146.5 points in the third quarter indicating a decline of 8.9%.

“Large companies are relatively more optimistic than small and medium enterprises (SMEs) as the composite index for large companies stood at 137.5 points compared to 127.5 points for SMEs,” the report said. “Additionally, companies in services sector are more positive compared to the manufacturing and trading sectors as respondents from the trading sector depicted the least optimism.”

In the report, the SME optimism index registered a decline of 14.7 points (10.3%) as it fell from 142.2 points during the third quarter of 2020 to 127.5 points in the fourth quarter of the same year.

The score of SME optimism index was lower compared to large companies due to a decline in business optimism in the trading sector.

The reason behind low optimism among SMEs is that the impact of Covid-19 was felt more acutely by them because 43% of SMEs reported experiencing business disruptions due to pandemic as a key challenge to growth, compared to just 25% of large companies.

Around 19% of respondents from SMEs were unsure of the business situation in the upcoming quarter, a significantly higher number compared to the fourth quarter of 2019 (pre-Covid era) which was only 5%.

“This can be attributed to resurgence in Covid-19 cases in the fourth quarter of 2020 and uncertainty regarding its implication on businesses,” the report claimed.

Still, 57% of the respondents from SMEs forecasted improvement in export performance in the upcoming quarter - first quarter of 2021 - despite the fact that it fell 11 points during the previous quarter (October-December 2020).

Services sector remained mostly optimistic with a BOI of 142.7 points while trading sector turned out to be least optimistic with 124 points.

Exporters’ optimism index, at an aggregate level, stood at 132.6 points during the fourth quarter of 2020 compared to 141.1 points in the third quarter of 2020.

The report identified US, China and UK as top exporting destinations for businesses.

Published in The Express Tribune, February 21^st, 2021.

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