According to a recent Gallup survey conducted in the first quarter of this year, a staggering 73 percent of businesses do not believe that the newly elected government led by Prime Minister Shehbaz Sharif will effectively address the country’s business challenges.
The survey found that only 25% of the businesses surveyed expressed some level of hopefulness.
Of Pakistan’s businesses, particularly those involved in selling garments, commodities, stationery, and gift items, 47% perceive their current conditions as poor or worse. However, this reflects a slight improvement of three percent compared to the previous quarter.
The Gallup Pakistan Survey report noted that the current business situation score on the Gallup Business Confidence Index has increased by seven percentage points to 6% in the first quarter of 2024 from -1% in the previous quarter.
Despite ongoing political instability affecting economic security, the report highlighted that the business situation score has shown improvement.
The report also mentioned that while the current business score on the Gallup Business Confidence Index has continued to recover for the fifth consecutive quarter, there has been a reversal in the future business score and the country’s direction score.
Expectations for Future Business Conditions
The survey report indicates that businessmen hold pessimistic expectations for future business conditions. The net future business confidence score has deteriorated by 16% since the last quarter, now standing at 4%. This suggests a significant decline in confidence regarding future business prospects.
Direction the Country is Heading
The business community’s perception of the country’s direction is largely negative, with only 20% of respondents believing that Pakistan is heading in the right direction. The direction of the country score has decreased to -60%, down 13 percentage points compared to the previous quarter.
The report notes an overall decline in the future business and country direction scores between the third quarter of 2023 and the first quarter of this year.
Similar to the previous survey, inflation remains the most commonly cited problem, with more than two out of four businesses expressing a desire for the new government to control it. Additionally, there has been an increase in the proportion of businesses wanting the government to address the devaluation of the rupee.
The report also highlights a shift in concerns, with political instability and taxes becoming less prominent compared to the previous quarter, while utility bills and business-related legislation have become more concerning.
When asked whether business conditions over the past three months led to a decrease in the workforce, three out of ten businesses surveyed answered affirmatively. This represents a 6% decline compared to the previous quarter.
Sales in Ramadan
Despite persistent inflation and sluggish economic activity in the country, businesses were surveyed about their sales during Ramadan, with more than half reporting a deterioration in sales. Only 18% reported an improvement.
The survey further reveals that although the majority of businesses (74%) did not report such complaints, some service providers and manufacturers stated that they had to pay bribes in the past six months, up to March, in order to operate their businesses.
Role of Govt for Businesses
According to the survey report, about half of the businessmen (45%) view the government as irrelevant for their business, while 23% perceive it as a facilitator and 33% see it as a hurdle.
Despite the government’s claims of reducing load-shedding, the number of businesses experiencing power outages has increased by seven percent to 45% this quarter compared to the previous one.
Bilal Ijaz Gilani, executive director at Gallup Pakistan and chief architect of the Gallup Pakistan Business Confidence Index Pakistan, noted that while more businesses perceive their current situation as better than before, pessimism about the country’s economic future and direction has worsened.
He emphasized the need for stability and continuity of policies in both economic and political realms, urging the country’s economic and political managers to pay close attention to this aspect.
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Majority of the businesses surveyed expressed limited optimism about the new government, highlighting the importance of actively addressing issues faced by the business community as a top priority for both federal and provincial governments.
This latest survey marks the 12th quarterly Business Confidence Survey conducted by Gallup across Pakistan. The Business Confidence Index serves as a crucial indicator of the sentiments of the business community and is utilized by policymakers worldwide. The survey involved approximately 535 businesses across Pakistan.