Business confidence rises significantly

The confidence of entrepreneurs, companies and foreign investors in the economy of Pakistan has rebounded significantly owing to prudent monetary and fiscal policies coupled with a business-friendly budget for fiscal year 2021-22. According to the Business Confidence Index (BCI) Survey - Wave 2020, conducted by the Overseas Investors Chamber of Commerce and Industry (OICCI) during May to July 2021, the overall Business Confidence Score (BCS) in Pakistan now stands at positive 9%.

The score depicts a record improvement of 59% from the previous negative 50% score in the Wave 2019 survey conducted in May 2020. It is pertinent to mention that a positive BCI was last recorded during the Wave 2016 conducted in April 2018. “More good news on economic front … dramatic rise in confidence of business, especially foreign investors,” said Prime Minister Imran Khan in a tweet.

Arif Habib Limited analyst Sana Tawfik said that Pakistan was reaping fruits of measures taken by the State Bank of Pakistan (SBP) and the government aimed at providing fiscal and monetary relief to the business community in the face of challenges posed by the Covid-19 pandemic. Improvement was witnessed in the overall domestic recovery, which aided consumer and business confidence, she said. “Growth has been recorded in nearly all sectors, especially manufacturing,” said Tawfik.

“High frequency indicators like sales of fast moving consumer goods, automobiles, cement, oil products and electricity also pointed to a robust growth.” The shift of confidence of the business community from negative in the last survey to positive was driven by all the three segments, ie manufacturing, services, and retail and wholesale. While the first two sectors recorded an increase of 65% each (manufacturing from -48% to positive 17% and services from -59% to positive 6%), the score of the retail/wholesale sector rose 44% (from -44% to 0).

“Improved business confidence is indeed good news, which may contribute to more private investment in the country,” said Centre for Peace and Development Initiatives (CPDI) CEO Mukhtar Ahmad Ali. “However, it is equally important to note that it moved to the negative territory after 2018 under the current government and, while it has improved, it will be a challenge to sustain it.” According to him, the major risks to the business confidence include significant currency fluctuations, higher inflation, rising current account deficit, uncertainty about the IMF programme and the situation in Afghanistan.

Commenting on the improved score, OICCI President Irfan Siddiqui observed that results of the BCI survey indicated a very dramatic turnaround in the confidence of businessmen, including foreign investors. “Despite the challenging macroeconomic indicators like the high exchange rate and accelerated inflation, partially offset by a reduced bank interest rate, the Wave 2020 BCI feedback strongly reflects optimism of the business community moving forward, contrary to pessimism in the previous Wave 19,” he said.