Business confidence up, but stays in negative zone

Index recovers four percentage points to negative 14% in Mar-Apr survey

KARACHI:

Business confidence in Pakistan has gone up by four percentage points, though it still remains negative, as reflected in the 25th Wave of the Business Confidence Index (BCI) survey conducted across the country during March-April 2024 by the Overseas Investors Chamber of Commerce and Industry (OICCI).

“The OICCI Business Confidence Index has shown some positive signs of economic recovery, rising to negative 14% in March-April 2024 from negative 18% in the previous survey from October-November 2023,” said OICCI President Rehan Shaikh. The upward trend, albeit slow, indicated a more optimistic business environment, supported by improving economic growth, a stable exchange rate, and declining inflation, he said.

Going forward, anticipation of rising inflation, high taxation and inconsistent government policies were expressed as key threats to business growth by the survey respondents.The BCI results reflect feedback from about 80% of the gross domestic product (GDP) stakeholders and consist of 43% participants from the manufacturing sector, 36% from services, and 20% from retail/wholesale trade.

Sector-wise breakdown reveals that compared to the last wave, confidence declined substantially to negative 15% among firms in the manufacturing sector, indicating significant challenges confronting the sector.

In contrast, the retail sector’s confidence rose 16% from negative 31% in the previous wave to negative 15% in the current one, showing the highest improvement among the three sectors. The services sector demonstrated signs of optimism, although overall confidence remained negative 14%, compared to negative 18% in the previous wave.

Discussing the results, OICCI Secretary General M Abdul Aleem said: “The main concern for the country highlighted in the 25th Wave of the BCI survey is the drop in the new investment index to negative 12% compared with negative 4% in the last wave, which is mainly attributed to ineffective commercial and trade policies and an unclear global security situation.”

The BCI of OICCI members, randomly included in the survey, was recorded at negative 4%, displaying a notable decline from positive 3% in Wave 24.

The global business situation over the past six months and expectations about the next six months are the main driving factors for this drop in foreign investors’ confidence. However, as seen in the past, the confidence of OICCI members still remains higher than that of non-members.

Key factors that caused concern over the past six months included political instability (74%), fuel prices (70%), high inflation (69%) and currency devaluation (65%).

On the positive side, declining inflation, stable exchange rate and better economic growth were recorded as favourable factors, along with improvements in company, industry and business situation.

The BCI survey respondents also foresaw continued risk of political instability, rising fuel prices, and rebounding inflation in the future, which restrained their confidence and showed a marginal improvement. Alpha Beta Core CEO Khurram Schehzad said business confidence inched up as the BCI showed some positive signs of economic recovery.

Published in The Express Tribune, June 4^th, 2024.

Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.