Pakistan’s business confidence score drops to negative 4%

Pakistan’s business confidence score drops to negative 4%

According to the Overseas Investors Chamber of Commerce and Industry (OICCI), Pakistan’s business confidence score (BCS) fell to negative 4% in September-October 2022, down from positive 17% in March-April 2022.

From September to October 2022, the OICCI’s comprehensive Business Confidence Index (BCI) Survey – 3Wave 22 was conducted across the country.

The “services sector” experienced the greatest drop in confidence (24%), followed by “retail and wholesale trade” (22%), and manufacturing (20%).

The survey sample included 42% manufacturing respondents, 33% services respondents, and 25% retail/wholesale trade respondents.

Despite a 20% drop in confidence, the manufacturing sector had a net confidence level of positive 3%, while the services and retail sectors had negative 8% and 14%, respectively.

OICCI President Ghias Khan commented on the BCS, saying, “The substantial decline in overall business confidence score to negative 4% is regrettable, but not surprising given the highly challenging political and economic situation over the last six months.”

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Aside from extremely high inflation and higher fuel prices, significant currency depreciation dampened economic activity.

“Record rains in August caused severe flooding in Sindh and other parts of the country,” he added.

OICCI BCI Survey, conducted on a regular basis in nine cities across the country, covering 80% of the GDP, with a higher weightage given to key business centres of Karachi, Lahore, Rawalpindi-Islamabad, and Faisalabad. The OICCI Survey feedback covers the business environment in the previous six months at the regional, national, sectorial, and own business entity levels, as well as the anticipated business and investment environment in the next six months.

Overall, more than half of survey respondents (56% vs 19% in the previous wave) were negative about the business environment in the previous six months, and only 2% (vs 18% in the previous survey) were optimistic about the next six months. OICCI Vice President Amir Paracha commented on the business situation for the next six months, saying, “These are challenging times, and the authorities are doing everything they can to navigate the enormous challenges ahead, including managing inflation, limited availability of foreign exchange, and resource constraints.”

He added that key stakeholders, particularly foreign investors, would continue to support the authorities in implementing long-term policy measures to streamline economic fundamentals, including fair taxation for all, and to facilitate business and investment in the country. The sentiments of OICCI members, the leading foreign investors, who were randomly included in the survey, are positive 6%, significantly lower than the previous wave’s positive 33%. Foreign investors have historically been more confident than non-members.

Ghias Khan observed, in response to OICCI members’ survey responses, that “foreign investors’ feedback could have been more positive, but for serious concerns on a few critical issues such as the undue delay in revising pharma pricing and the extreme delays in overseas remittances for goods, services, and dividends.”

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Such actions were extremely detrimental to the country’s ability to attract foreign direct investment. “Inflation (78%), high taxation (71%), and currency devaluation (70%) were identified as the three major threats to business growth in the survey, which could potentially slow down business growth in Pakistan,” he said.

Looking ahead, only 18% (34% in Wave 21) anticipate increased business operations, 2% (21% in Wave 21) anticipate new capital investment, and 7% (positive 16% in Wave 21) anticipate increased employment in their respective businesses.

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