Severe inflation affecting business confidence

Survey cautions growth across developed economies has hit a standstill.

KARACHI:

The Global Economic Conditions Survey (Gecs) for the second quarter of 2012, undertaken by the Association of Chartered Certified Accountants and the Institute of Management Accountants, warns that double-digit inflation has dented business confidence on Pakistan.

While most major Gecs markets have held on to some of the confidence gains made in early 2012, Pakistan has not. Nearly half (47%) of all respondents, up from 41% in late 2011, reported losses of confidence and 58% of respondents believe the global economy is either deteriorating or stagnating, up from 53%. That said business confidence in Pakistan appears to be only marginally below the global average.

Severe inflation appears to be at the heart of the confidence problem in Pakistan. Respondents reported the strongest inflationary pressures of any major Gecs market, with 80% citing rising input prices, up from 75% in late 2011. As a result, trade credit conditions have deteriorated substantially and late payment has increased. This has led to some business failures, despite the fact that access to more formal finance appears to be becoming easier.

On the bright side, employment and investment both appear to be increasing. Opportunities highlighted more frequently focus on niche or innovative markets and products as well as collaboration across the supply chain, for instance on quality standards.

Published in The Express Tribune, July 24^th, 2012.