Pakistan’s overall business confidence improved to a two-year high, driven by positive economic indicators, but the country’s investment outlook weakened further for the next six months, according to a survey conducted by the Overseas Investors Chamber of Commerce and Industry (OICCI).
The overseas chamber reported that the new (future) investment index (NII) declined 1,100 basis points (bps) to negative 23% in November 2024 compared to negative 12% in May 2024.
The slump in the investment outlook for the next six months “reflecting heightened caution among businesses,” OICCI reported on Wednesday in its latest biannual business confidence survey (Wave 26) held in October-November 2024.
Highlighting key threats to business growth in the near future, respondents to the survey said rising inflation and high taxation consistently remained the top two risk factors to their businesses in Wave 26 compared to Wave 25.
Pakistan rupee devaluation, inconsistent government policies, corruption/ bribery, and security threats/street crimes were among the threatsfor businesses highlighted in the survey.
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Persistent challenges such as high inflation, political instability, and rising fuel prices remained top concerns, with 66% of respondents expressing negativity about the past six months.
However, despite the negatively, “businesses anticipate a significant increase in sales volume over the next six months, rising to positive 30% from negative 10% in the previous wave”.
BCI improves but still negative
Meanwhile, Pakistan’s business confidence index (BCI) recovered in contradiction to worsening investment outlook index.
The index (BCI) surged 9% to a two-year high at negative 5% in October-November 2024 compared to negative 14% in March-May 2024, suggesting the index continued to improve in the fourth consecutive biannual survey.
Better economic growth, some improvement in exchange rate, and decline in inflation contributed to the improvement in the overall business confidence, according to the survey.
The services sector recorded the most significant recovery in BCI, turning to positive 2%, a major shift from negative 14% in the last wave.
“Retail/wholesale sector being the only sector to have decreased confidence (BCI) to negative 18% in Wave 26 from negative 15% in Wave 25,” it said.
Besides, the index representing future buying orders to industries and new job index for the next six-month both improved.
The new order index (NOI) increased 16% to 20% in November, compared to 4% in May 2024. The new job index (NJI) ticked up to positive 1% at present compared to negative 1% some six months ago, as per the survey.
Commenting on the BCI Wave 26 survey findings, Yousaf Hussain, President OICCI said in a press statement, “The improvement in the Business Confidence Index reflects an overall improvement in the economic outlook and the resilience of Pakistan’s business environment amidst ongoing challenges.
Hussain was of the view that the government took “confidence building measures” in compliance with the International Monetary Fund’s (IMF) Extended Fund Facility (EFF).
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The measures translated into “improved country risk rating by international rating agencies, and a boost in foreign exchange reserves of the country, which helped maintain a stable exchange rate, containing inflationary increase to record lows, all of which collectively led to a positive business environment”, Hussain said.
“[However,] the challenges of increasing cost especially of energy, high taxation and policy inconsistency need to be proactively managed through deeper engagement of policymakers with the industry.
“It would certainly enable the country to further improve business confidence, attract local and foreign investment, and ultimately boost job creation in the country,” he said.
OICCI said the survey, conducted face-to-face across the country, included participants representing almost 80% of the gross domestic product (GDP).
Greater weight was given to business stakeholders in key centers such as Karachi, Lahore, Islamabad, and Faisalabad, while the survey sample was comprised of 41% of respondents from the manufacturing sector, 35% from the services sector, and 24% from the retail/wholesale sector, it said.