Business Confidence in Pakistan Inches Up, While Inflation, Taxation, and Policy Concerns Cloud Future Outlook: OICCI Survey

Business confidence in Pakistan has improved by 4 percent, though it remains in the negative, as reflected in the 25th Wave of the Business Confidence Index (BCI) survey conducted by the Overseas Investors Chamber of Commerce and Industry (OICCI). The survey was conducted across Pakistan during March-April 2024.

Rehan Shaikh, President of OICCI, stated, “The OICCI Business Confidence Index has shown some positive signs of economic recovery, rising to negative 14 percent in March-April 2024 from negative 18 percent in the previous survey of October- November 2023. This upward trend,” Rehan continued, “albeit small, indicates a more optimistic business environment, supported by improving economic growth, a stable exchange rate, and declining inflation”.

Going forward, anticipation of rising inflation, high taxation and inconsistent government policies have been expressed as key threats to the business growth by the survey respondents.

The OICCI BCI results reflects feedback from about 80 percent of the GDP stakeholders and comprised of the 43 percent participants from the manufacturing , 36 percent from services , and 20 percent from the retail/wholesale trade sectors. The sectoral breakdown reveals that compared to the last wave, confidence declined substantially to negative 15 percent among firms in the manufacturing sector, indicating significant challenges confronting this sector. In contrast, the retail sector’s confidence rose by 16 percent from negative 31 percent in previous wave to negative 15 percent in current one, showing the highest improvement among the sectors. The services sector demonstrated signs of optimism, although overall confidence remained negative at negative 14 percent, compared to negative 18 percent in the previous Wave 24.

Secretary General of OICCI, M. Abdul Aleem, discussing the results, expressed ” The main concern for the country highlighted in the Wave 25 BCI survey is the drop in the new investment index to negative 12 percent compared with negative 4 percent in the last wave, which is mainly attributed to ineffective commercial and trade policies and an unclear global security situation. The BCI of OICCI members, randomly included in the survey,” M. Abdul Aleem continued, “was recorded at negative 4 percent, showing a notable decline from positive 3 percent in Wave 24. The global business situation over the past six months and expectations about the next six months are the main driving factors for this drop in foreign investors’ confidence. However, as seen in the past, the confidence of OICCI members still remains higher than that of non-members”.

Key factors raising concerns over the past six months include political instability (74 percent), fuel prices (70 percent), high inflation (69 percent), and currency devaluation (65 percent). On the positive side, declining inflation, stable exchange rate, better economic growth were recorded as favourable factors, along with improvements in the company and industry business situation. The BCI survey respondents also foresee continued risk of political stability, rising fuel prices, and rebounding inflation in the future, which restrained their confidence and showed a marginal improvement.