In a recent Gallup survey conducted in the second quarter of 2023, themajority of Pakistan’s businesses have expressed profound concernsregarding the country’s ability to avoid a potential default on itsinternational financial obligations. This apprehension persists despiteIslamabad’s recent success in securing a $3 billion bailout package fromthe International Monetary Fund (IMF), which temporarily staved off animminent crisis.
The survey, encompassing more than 500 businesses across Pakistan,revealed that an alarming 72% of respondents expressed grave concernsregarding Pakistan’s potential default, shedding light on the lingeringeconomic uncertainties in the nation. Of these respondents, 49% indicated asignificantly high level of concern, while 17% displayed no concern at all,as revealed by the Gallup Pakistan Business Confidence Index Q2 2023report.
Surprisingly, the survey also indicated that the business community wasslightly less pessimistic about their own businesses’ fate compared to theprevious quarter, despite the ongoing crises, escalating inflation, andrising power costs. Inflation, utility bills, and rupee devaluation toppedthe list of growing concerns among business owners.
However, business owners remain predominantly pessimistic about futureprospects and the overall direction in which Pakistan is heading. Thesurvey points to persistent business insecurity due to the prevailingeconomic and political crises. The relentless inflation, in particular, hasbeen cited as a critical issue, with business owners urging the caretakergovernment to address this problem as it erodes people’s purchasing powerand keeps interest rates at a record high.
The sharp depreciation of the Pakistani rupee and the imposition of taxesalso featured prominently on the list of concerns that businesses want thegovernment to tackle. Additionally, the survey highlighted a 25% increasein businesses facing load-shedding during the quarter, with 69% confirmingpower outages. A particularly distressing finding is that half of thebusinesses surveyed reported having to lay off employees due to thechallenging business conditions, representing a 13% increase compared tothe previous quarter.
When questioned about their current and future business outlook, as wellas the country’s direction, the respondents overwhelmingly expressedpessimism. While these negative sentiments persist, there was a marginalimprovement in business confidence compared to the first quarter, asindicated by slight percentage point increases in various aspects.
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Notably, despite economic insecurity, the current business situation scoreon Gallup’s second-quarter Business Confidence Index improved by twopercentage points. However, this improvement did not offset the overallnegative sentiment. Concerns regarding the future were equally pronounced,with 60% expressing negative expectations for their businesses. Only 40%held optimistic views, leading to a Net Future Business Confidence score of-20%, marking a 2% improvement since the beginning of the year. Reflectinga consistently grim outlook, 88% of business owners and managers believedthat Pakistan was heading in the wrong direction, a sentiment echoed fromprevious quarters. The Direction of the Country Score dropped to -79%, adecrease of four percentage points compared to the last quarter.
In response to the economic challenges, half of the surveyed businessesincreased their output prices during the quarter, albeit fewer than in theprevious quarter. More businesses opted to reduce their output prices asthey navigated the tumultuous economic landscape.
This survey is the 10th edition of a quarterly Business Confidence Surveyconducted by Gallup Pakistan, aimed at capturing the sentiments of thebusiness community in the country. The Business Confidence Index, used bypolicymakers worldwide, underlines the challenges and concerns ofPakistan’s business sector. The survey involved approximately 560businesses from across Pakistan. Despite the temporary respite provided bythe IMF bailout, it is clear that Pakistan’s business community remainsdeeply apprehensive about the nation’s economic future, emphasizing theneed for comprehensive measures to address the underlying issues.
