Business confidence up, long-term optimism down

KARACHI: Business owners are cautiously optimistic about their current operations as the government is trying to revive the financially beleaguered economy, contrasting with a largely pessimistic outlook for the country’s economic future, a Gallup Pakistan survey showed on Friday.

The latest Gallup survey conducted in the first quarter of this year finds that 47 percent of Pakistan’s businesses, especially those selling garments, commodities, stationery, and gift items, perceive themselves to be in bad or worse condition. This shows a three percent improvement over the previous quarter.

The current business situation score on the Gallup Business Confidence Index has improved by seven percentage points to 6 percent in 1Q2024 from -1 percent in the previous quarter, the Gallup Pakistan Survey report said.

“While economic security has not fully stabilised due to the ongoing political situation, the business situation score has improved regardless,” the report stated.The report mentioned that while the current business score on the Gallup Business Confidence Index continued to recover for the fifth straight quarter, the future business score and the direction of the country score saw a reversal.

Asked about their expectations for future business conditions, the businessmen were pessimistic about the future as the net future business confidence score has worsened by 16 percent since last quarter and now stands at 4 percent, according to the survey report.

The business community’s perception of the direction the country is heading in was negative, as only 20 percent of respondents said Pakistan was heading in the right direction. The direction of the country score has fallen to -60 percent, down 13 percentage points compared to the previous quarter.

“There is an overall decline in the future business and direction of country scores” between the third quarter of 2023 and the first quarter of this year, the report observed.Like the previous survey, inflation was the most cited problem, as more than two out of four businesses would want the new government to control. The proportion of those who want the government to arrest the devaluation of the rupee has also increased.

“Political instability and taxes have taken a backseat in concerns relative to the past quarter, while utility bills and business-related legislation have become more of a concern,” the report said.

Asked whether business conditions during the past three months induced a decrease in the workforce, three out of 10 businesses surveyed said yes. This number shows a 6 percent decline over the previous quarter.

Given the still backbreaking inflation and slow economic activity in the country, businesses were asked about their sales this Ramazan, and more than half of them said it had worsened. Only 18 percent said they are doing better.

Moreover, a majority, 73 percent, of the businesses surveyed do not have hope that the newly elected government of Prime Minister Shehbaz Sharif will address the country’s business problems. Only 25 percent of the businesses surveyed were somewhat hopeful.

The survey reveals that while the majority of businesses, 74 percent, did not make such complaints, some service providers and manufacturers said they had to pay bribes in the past six months ending March to run their businesses.

About half of the businessmen, 45 percent, think of the government as irrelevant to their business, while 23 percent look at it as a facilitator, and 33 percent consider it a hurdle, according to the survey report.

Despite the government’s claims to have reduced load-shedding, the number of businesses braving power outages has increased by seven percent to 45% this quarter compared to the previous one.

“After many quarters, more businesses perceive that their current situation is better than before, which is positive news,” said Bilal Ijaz Gilani, executive director at Gallup Pakistan and chief architect of the Gallup Pakistan Business Confidence Index Pakistan, in the report. He, however, said pessimism about the country’s economic future as well as the direction of the country have deteriorated.

“Lack of certainty about both politics and economic policies continues to hurt the business community’s sentiment, despite the fact that there has been some improvement on the ground,” Gilani said.

He urged the country’s economic and political managers to pay close attention to bringing stability and continuity to policies.

The majority of businesses surveyed are not very optimistic about the new government, he said, citing the latest survey results.“Engagement and actively resolving business community issues should therefore be the top priority of the federal and provincial governments,” said the executive director at Gallup Pakistan.