Business pessimism grows under ‘worse’ govt

The country’s business owners have become increasingly pessimistic about their future due to ongoing political turmoil and the new tax-heavy budget, describing the federal government as a “worse” manager of the economy, according to a recent survey.

Gallup Pakistan surveyed owners of 454 small, medium, and large businesses from over 30 districts in the second quarter of 2024 to compile its Gallup Business Confidence Index report. Many businesses found the government’s new financial plan for FY25 to be unfriendly to business operations, with about two in five businesses citing inflation as their biggest problem.

Majyd Aziz, Former president of the Karachi Chamber of Commerce and Industry (KCCI), commented on the survey, stating, “The current economic situation is best described as chickens coming home to roost.” Aziz pointed out that the private sector’s pessimistic outlook towards the government’s economic policies is a result of over a decade of economic mismanagement. He cited skewed priorities, wasteful financial outlays, heavy dependence on loans, losses of state-owned enterprises, inefficiency of taxation and regulatory agencies, political instability, and rampant corruption as root causes.

Aziz remarked that the survey underscores the business confidence matrix. The cumulative effect of continuous economic mismanagement has had a devastating impact, leading to business frustration and drastic actions such as strikes, protests, and pressure on chambers and associations. According to the survey, 57% of respondents view the future pessimistically, though Aziz believes more than 80% actually see a bleak future.

The survey found that price hikes remained the most cited problem, with 37% of businessmen wanting the government to address inflation, which soared to 12.6% in June, severely eroding consumers’ purchasing power. More than half (54%) of Pakistan’s businesses believe the current government is worse at managing the economy compared to the previous administration.

Executive Director at Gallup Pakistan and Chief Architect of the Business Confidence Index, Bilal Ijaz Gilani stated, “Ongoing political uncertainty and the recently announced heavy-on-taxation federal and provincial budgets have significantly impacted business optimism in the country.” The business community, already burdened with various regulatory measures and taxes, expressed serious reservations about the new budget, he said.

Six out of 10 businesses surveyed reported facing crippling load-shedding. This quarter, 16% more businesses reported increased power outages due to heavy load on the country’s power infrastructure in summer. Overall, 61% of businesses experienced load-shedding.

Businesses appeared more pessimistic about the future, with 57% expressing negative expectations, while only 43% were optimistic. The net future business confidence score has worsened by 36% since the last quarter, now standing at -14%. Pessimistic expectations were especially prevalent among businesses selling hardware and tools, electrical items, and manufacturing products. In contrast, businesses selling home decor, gift items like toys and sports-related products, and cosmetics were more optimistic.

The net direction of the country score also worsened to -64%, dropping by four percentage points from the previous quarter, continuing a consistently negative trend. Only 18% of respondents were optimistic about the country’s direction.

A significant majority of businessmen (85%) do not consider the government’s new financial plan to be a “good budget,” with only 11% of manufacturers and 15% of service providers viewing it as business-friendly.

Due to high inflation and poor business conditions, 9% more employers had to decrease their workforce in the second quarter. Additionally, 60% of businesses reported worse sales this year compared to last, with 66% of manufacturers and 58% of service providers experiencing a decline in sales.