Business Confidence negatively affected by COVID-19 – OICCI BCI 2020 Survey

Overseas Investors Chamber of Commerce and Industry (OICCI) shared the results of its Business Confidence Index (BCI) Survey – Wave 19, which shows that the overall Business Confidence Score (BCS) in Pakistan stands at 50 percent negative, a further drop by 5 percent from the already – 45 percent negative score in Wave 18 Survey conducted in August 2019.

The latest BCI survey results reflect the continued pessimism across all sectors in general and particularly in the manufacturing and services sector. The Business confidence of manufacturing sector, which represents about 42 percent of the respondents, declined by 5 percent over the past six months and was 48 percent negative compared to 43 percent negative in Wave 18. The BCS of the services sector, representing 29 percent of the survey respondents suffered a significant dip from 49 percent negative in Wave 18 to 59 percent negative. The BCS of retail and wholesale trade remained unchanged; 44 percent negative in both Wave 18 and Wave 19 surveys.

The results of the latest BCI Survey, conducted throughout Pakistan during May to June 2020, were largely influenced by the COVID-19 pandemic which has negatively impacted nearly all the businesses. The prolonged uncertainty, due to the pandemic and strict lockdowns and other corrective measures taken by the authorities impacted a large segment of business activities.

Commenting on the low BCS, Haroon Rashid, President OICCI, observed “the huge scare caused by the pandemic, came during a period when the country was already in the midst of a major economic stabilization program since early 2019, with a significant devaluation of currency (38 percent decline in the past 12 months to June 2019) very high SBP policy rate (as high as 13.25 percent in Dec ’19) and resultant high inflation impacting all businesses. Therefore the poor Business confidence score in the last two surveys, while a matter of concern to all the stakeholders are not surprising, in fact quite understandable, under the current challenging circumstances. Key is to focus on the future that looks both brighter and rife with opportunity as the country is slowly coming out of its COVID crisis, there is significant latent growth potential in the country, Govt. and OICCI need to work together to create a positive growth momentum for the country”.

During the past 6 months, majority of the respondents experienced decline in their sales volumes, profits and ROI and were unable to expand their business. However, for the next 6 months the survey respondents are comparatively more positive.

One of the key factors affecting the overall sentiment was the very poor view of the survey participants of the global business situations in the past 6 months (down from -9 percent negative in Aug’19 to -79 percent negative in May ’20), and of Pakistan business situations (down from -75 percent in Aug ’19 to -81 percent in May ’20) and survey participants own business situations (from -65 percent in Aug ’19 to -83 percent in May ’20).

As mentioned above the BCS of the Services sector recorded the highest net negative sentiments of 10 percent overall. Major services sectors, showing increasing negative confidence scores, were Real Estate (-78 percent vs. -68 percent in May ’20), Community, Social and Personal sectors (-70 percent vs. -51 percent) whereas Transport and Communication (-53 percent vs. -68 percent) and Financial services (-37 percent Vs -41 percent) recorded a drop in negativity.

Within the manufacturing sector, Tobacco (-76 percent vs. -73 percent in October ’19), Chemicals/Cement (-58 percent vs. -51 percent), and Non-metallic (-38 percent vs. -35 percent) sub-sectors recorded declines while Petroleum/Oil & Gas (-18 percent vs. -42 percent in October ’19), Automobiles (-52 percent vs. -66 percent) and Food (-40 percent vs. -55 percent) sub-sectors have shown significant improvement in the current BCI -W 19.

OICCI BCI survey, conducted every six months, is a comprehensive review of the perception of business leadership in Pakistan covering business environment at regional, national, sectorial and own business entity level. The assessment takes into account the business environment in the past six months, as well as seeking respondents’ feedback on the anticipated business and investment environment in the next six months. The BCI feedback is indicative of the direction in which the economy is moving based on the perceptions of key stakeholders of the business community across the country and representing about 80 percent of the GDP.

The sentiments of the OICCI members, who were randomly included in the survey, has also recorded a sharp decline of 38 percent, from 36 percent negative in wave 18, to 74 percent negative in the latest BCI wave 19 survey, as opposed to the overall confidence scores which declined from negative 45 percent to negative 50 percent, as mentioned above. In all the previous 18 BCI surveys conducted so far, the business confidence of the foreign investors had remained much higher than their local counterparts included in the surveys.

The BCS in Metros has increased marginally by +3 percent (from -49 percent in Aug 2019 to -46 percent in May 2020) while it dropped by 4 percent in non-metros (from -34 percent in Aug 2019 to -38 percent in May 2020). BCS score has improved by 3% in Karachi (from -53 percent to -50 percent) while it dropped by 12-13 percent in Rawalpindi /Islamabad (from -47 percent to -59 percent) and in Lahore (from -41 percent to -54 percent) amongst respondents who are pessimistic.

Haroon Rashid concluded that ‘Going forward, OICCI expects that various positive measures recently taken by the federal government, and various initiative of the SBP to support and sustain vulnerable stakeholders in the business and industry to successfully navigate the current economic challenges will bear positive results”

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