Gallup Index: Political instability, economic crises exacerbate business insecurity

KARACHI: Business owners in Pakistan are becoming increasingly pessimistic as inflation, rupee depreciation, fears of default and political uncertainty have left them insecure about the current and future conditions for business, according to the latest Gallup Pakistan Survey released on Friday.

Last year’s political instability has also been carried over to combine with various economic crises that have exacerbated business insecurity, the Business Confidence Index showed. The survey is the ninth of a quarterly Business Confidence Survey by Gallup Pakistan. Business Confidence Index is an important barometer capturing the sentiments of the business community in any country and is used across the world by policymakers. The survey was conducted in the first quarter of 2023 with around 520 businesses across Pakistan. The index has revealed that business confidence in Pakistan continued on a steep downward trajectory in the first quarter of 2023, with no signs of recovery. Value on all three strands of the Business Confidence Index was negative, indicating a lack of confidence in the business situation of Pakistan. The number fell slightly during the current quarter, continuing the downward trend observed since the end of the previous year.

Bilal Ijaz Gilani, executive director, of Gallup Pakistan and chief architect of the Gallup Pakistan Business Confidence Index Pakistan, noted that businesses are facing multiple calamities, including decades-high inflation, lack of stability in the political system, and the looming threat of sovereign default.

According to the survey, 66 percent of businesses perceive themselves as facing bad or worse conditions. There is a 7 percent increase in businesses reporting very bad business conditions. A slight fall was observed in Gallup Pakistan Business Situation Net score this quarter.

Around 70 percent of businesses perceive bad conditions in Sindh and Khyber Pakhtunkhwa, and 64 percent in Punjab. Most business types reported the business being in a bad state. In the construction, cosmetics, and industrial machines/equipment sector, there was a 50-50 split between good and bad conditions.

This quarter, 7 percent more businesses than in the previous quarter, think that their business will be worse off in the future. Up to 61 percent in Q1 2023 said future expectations are negative, while only 38 percent expect things to improve at all. The Net Future Business Confidence score has worsened by 11 percent since the previous quarter and is now at negative 22 percent.

Business community perceptions regarding the direction of the country remain consistent with the previous quarter. Negative perceptions are at an all-time high, with 90 percent of businesses saying that the country was headed in the wrong direction.

Similar to Q4 2022, inflation is the most cited problem in this quarter that businesses (45 percent) would like the government to solve. Compared to last quarter, 10 percent more want the government to help with currency depreciation but 7 percent fewer believe the government should provide relief on utility prices.

More than half (57 percent) of the businesses surveyed have not undergone layoffs in the last quarter, but 38 percent reported a decrease in their workforce during this time. Up to 58 percent of those surveyed said that they raised average output prices in the last quarter. Of these, 45 percent raised those prices between 20 percent and 50 percent.

A majority (72 percent) of the surveyed are concerned about Pakistan’s potential default, with nearly half (49 percent) expressing significantly high concern, whereas 17 percent of respondents are not concerned at all.

Of the surveyed businesses, 44 percent said yes to daily load-shedding this quarter, which is 28 percent less than the previous quarter. Of those businesses that said yes to load-shedding, nearly 3 out of 4 (73 percent) this quarter report facing 4 hours or less of load-shedding every day, compared to the previous quarter when a similar proportion of businesses (77 percent) reported 5-6 hours or less of load-shedding.

More than three-quarters of the businesses surveyed have not established a digital presence for themselves, with 76 percent not having WhatsApp for business, 86 percent not having a website and 85 percent not having a Facebook account.

The index highlights the pressing concerns of the business community in Pakistan amidst multiple economic crises. Negative perceptions regarding the direction of the country remain consistent with the previous quarter, with businesses hoping for government intervention in solving issues related to inflation and currency depreciation.