Pakistan’s business confidence rises as firms look past pandemic

ISLAMABAD: Pakistan business confidence amongst foreign firms improved dramatically in May to July 2021, a survey showed on Monday, as economic activity picked up and Covid-19 vaccines started rolling out in the country.

“The overall Business Confidence Score (BCS) in Pakistan now stands at positive score of 9 percent, a record improvement by 59 percent from the previous negative 50 percent score in Wave 19 Survey conducted in May 2020,” revealed Business Confidence Index (BCI) Survey – Wave 20 conducted by the Overseas Investors Chamber of Commerce and Industry (OICCI).

The BCI survey was conducted throughout the country during May to July 2021. A positive BCI was last seen during Wave 16 conducted in April 2018. A statement by OICCI said the confidence of the business community across Pakistan shifting over from negative territory in last survey to positive territory is driven by all the three segments, manufacturing, services, as well as the retail/wholesale sectors, with the first two recording an increase of 65 percent each, (manufacturing from -48 percent to positive 17 percent and services from -59 percent to positive 6 percent) whilst the retail/wholesale sector went up by 44 percent (from -4 percent to 0).

As the lockdown restrictions have been lifted many of the manufacturing concerns have gone back to their 100 percent capacity of production and are able to sell their product even during the lockdowns, which positively impacts all business sectors.

Retailer and Wholesalers were largely affected by the Covid-19 restrictions as their business hours were cut short resulting income, cash flow and other issues. This segment also believes that the next 6 months will fare better with more sales, profits, and better situation overall for Pakistan.

Irfan Siddiqui, president OICCI said the results of BCI survey suggests a very dramatic turnaround in the confidence of businesses, including foreign investors. “Despite challenging macro-economic indicators like the high exchange rate, accelerated inflation, partially offset by reduced bank interest rate, the Wave 20 BCI feedback strongly reflects optimism of the business community moving forward, contrary to the pessimism in the previous Wave 19.”

Siddiqui said the key drivers of this optimism, and turnaround in sentiments, are the business community’s strong positive perception towards the future, specifically the next 6 months. “Through proactive economic and social policy measures taken by the authorities supported by the roll out of vaccines, the government appears to have succeeded in building confidence among the key economic stakeholders.”

He said the current fiscal year budget proved to be “a hit amongst the business community as the BCI score was significantly higher post fiscal budget, with respondents perceiving those policies are now more transparent, consistent, and predictable and expecting improvement in their business related KPIs over the next six months”.

The main driving force for the huge turnaround in the Wave 20 Business confidence score is the significant increase in optimism of respondents for the next six months in respect of their respective city’s business situation (+21 percent), industry business situation (+19 percent), own business situation (+20 percent), anticipated sales volume increase (+20 percent), profit increase (+22 percent) and return on investment increase (+19 percent).

The statement said the sentiments of the OICCI members, the leading foreign investors, has also recorded a sharp turnaround, and witnessed an improvement of 108 percent, from 74 percent negative in Wave 19, to 34 percent positive in the latest BCI Wave 20 survey, surpassing the overall countrywide BCI of 9 percent.

Abdul Aleem, OICCI secretary general said three major threats to businessgrowth identified in the survey, are corruption (67 percent), volatile energy costs (66 percent) and currency devaluation (60 percent) which could potentially slow down business growth in Pakistan. Nine of ten survey respondents believe that Covid had made it difficult to perform day to day business operations.

Looking ahead, survey respondents expressed continuing optimism in next six months with 25 percent expecting expansion in business operations, 39 percent of the respondents planning new capital investment and 12 percent respondents indicated plans for increased employment in their respective businesses.

The survey was done face to face, across the country in nine cities, covering 80 percent of the GDP, with higher weightage given to key business centers of Karachi, Lahore, Rawalpindi-Islamabad, and Faisalabad.