Pakistan’s business confidence has taken a significant hit due to the ongoing political and economic crises, according to the latest Gallup Business Confidence Index report. The report indicates that the situation has not improved in the first quarter of 2023, and 72% of the 520 businesses surveyed are worried about the country’s potential default. This has resulted in a lack of investment and growth, exacerbating economic challenges.
The survey is the ninth of a quarterly Business Confidence Survey by Gallup Pakistan, which is used by policymakers as a crucial barometer to capture the sentiments of the business community in any country. The report highlights that pessimism about the conditions and prospects of businesses has risen among owners, with last year’s political instability combining with various economic crises to exacerbate business insecurity.
Commenting on the survey, former member of the Prime Minister’s Economic Committee, Dr Abid Qaiyum Suleri said, “The survey reveals that uncertainty breeds uncertainties. He adds that the current vicious cycle of uncertainties, which are mutually reinforcing and aggravating each other’s impact, is eroding business confidence. The political tug of war and the inconsistent approach to the International Monetary Fund (IMF) program are leading to a trust deficit between the business community and the government and between the international community and the government.”
“The people of Pakistan are the direct victims of this situation,” he added.
The report shows that negative perceptions can change to positive with government policies that support business growth, such as rewarding innovation, investment, and business planning.
Speaking to the Express Tribune, Arif Habib Commodities CEO Ahsan Mehanti said, “Business confidence improves with the government’s will to help sustain.”
He added that the government’s policies that promote employment and productivity through incentives to businesses, including tax benefits, subsidies, and skill development, can help.
The report also highlights that inflation is the most cited problem that businesses would like the government to solve. Compared to the last quarter, 10% more businesses want the government to help with currency depreciation, but 7% fewer believe the government should provide relief on utility prices.
More than half of the surveyed businesses (57%) have not undergone layoffs in the last quarter, but 38% report a decrease in their workforce during this time. The report indicates that 66% of businesses perceive themselves as facing bad or worse conditions, with a 7% increase in businesses reporting very bad business conditions. Most business types reported the business being in a bad state, with a 50-50 split between good and bad conditions in the construction, cosmetics, and industrial machines and equipment sector.
Around 70% of businesses perceive bad conditions in Sindh and KPK, and 64% in Punjab. The report highlights that 61% of businesses in the first quarter of 2023 said future expectations are negative, while only 38% expect things to improve at all. The Net Future Business Confidence score has worsened by 11% since the previous quarter and is now at -22%.
Business community perceptions regarding the direction of the country remain consistent with the previous quarter, with 90% of businesses surveyed opining that the country is headed in the wrong direction.
President of United Business Group (UBG) Zubair Tufail said that, “In the current situation of the country, it is necessary to obtain a loan from the International Financial Institution, but depending on the IMF is not a permanent solution.”
He added that political chaos in the country is having a serious negative impact on business and the life of the general public. Due to the lack of political stability, investors and industrialists are facing an uncertain situation.
Gallup Pakistan, Executive Director, Bilal Ijaz Gilani says businesses in Pakistan are faced with multiple calamities, including decades-high inflation killing consumer purchasing power, an absolute lack of stability in the political system causing an environment of uncertainty and mistrust, and poor economic policies leading to a lack of investment and growth.
“In the past many decades of reading the pulse of the Pakistani business community, we have not seen such dire times being reported,” he said.
He emphasised the need for the government to take bold steps to improve the situation, including implementing policies that support business growth and addressing the concerns raised by the business community.
The Gallup Business Confidence Index report highlights the deepening economic and political crises in Pakistan and the resulting negative impact on business confidence.
The report underscores the need for the government to take immediate steps to address the concerns of the business community, including implementing policies that support business growth, promoting employment and productivity through incentives, and addressing inflation and currency depreciation. Failure to do so will only exacerbate the country’s economic challenges and hinder its ability to attract investment and create jobs.
Published in The Express Tribune, April 8th, 2023.
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