Inflation, Rupee depreciation, and loan default leave the business community perilously worried about current and future conditions
According to a Gallup Pakistan Survey with business owners in the first quarter of 2023 for the Gallup Business Confidence Index report, pessimism about the conditions and prospects of their businesses had risen among owners – last year’s political instability has carried over to combine with various economic crises and exacerbate business insecurity.
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.
Main Finding: Businesses are in steep decline!
On all 3 strands, the value was negative which meant that more businesses had a lack of confidence in the Business situation of Pakistan. The number fell slightly during the current quarter, carrying on the downward trend observed since the end of the previous year.
Bilal Ijaz Gilani, Executive Director Gallup Pakistan and Chief architect of the Gallup Pakistan Business Confidence Index Pakistan, notes:
“Businesses in Pakistan are faced with multiple calamities : decades high inflation killing consumer purchasing power , absolute lack of stability in political system causing overall despair not just in business community but their consumers and lastly no end in sight with respect to looming threat of sovereign default. In past many decades of reading the pulse of business community in Pakistan, we have not seen such dire times being reported”
66% of businesses perceive themselves as facing bad or worse conditions. There is a 7% increase in those businesses reporting very bad business conditions. A slight fall was observed in Gallup Pakistan Business Situation Net score this quarter. Around 70% of businesses perceive bad conditions in Sindh and KPK, and 64% 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% more businesses than in the previous quarter think that their business will be worse off in the future. 61% in Q1 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. Negative perceptions are at an all-time high, with 90% of businesses surveyed opining that the country is headed in the wrong direction.
Similar to Q4 2022, inflation is the most cited problem in this quarter that businesses (45%) would like the government to solve. Compared to last quarter, 10% more want the government to help with currency depreciation but 7% fewer believe the government should provide relief on utility prices.
More than half (57%) of businesses surveyed have not undergone layoffs in the last quarter, but 38% do report a decrease in their workforce during this time. 58% of businesses surveyed said that they raised average output prices in the last quarter. Of these, 45% raised those prices between 20% and 50%.
The majority (72%) of businesses surveyed are concerned by Pakistan’s potential default. Of these, nearly half (49%) express significantly high concern. 17% of survey respondents are not concerned at all.
44% of businesses surveyed said ‘yes’ to daily load-shedding this quarter, which is 28% less than the previous quarter. Of those businesses that said yes to load-shedding, nearly 3 out of 4 (73%) 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%) reported getting 5-6 hours or less.
More than three-quarters of the businesses surveyed have not established a digital presence for themselves. 76% do not have WhatsApp for business, 86% do not have a website, and 85% do not have a Facebook account.