The Gallup Business Confidence Index for the first quarter of 2023 paints a worrisome picture of business confidence, which continues to plummet amidst ongoing economic crises. According to a recent survey conducted by Gallup Pakistan, business owners expressed heightened pessimism regarding the conditions and prospects of their businesses. The combination of last year’s political instability and various economic challenges has amplified business insecurity, leading to a steep decline in confidence.

Business confidence continues to decline significantly amid economic crises, as indicated by the Gallup Business Confidence Index, which shows no signs of recovery in the first quarter of 2023. According to the survey conducted in the first quarter of 2023, business owners expressed increased pessimism about the conditions and prospects of their businesses. Last year’s political instability has persisted and combined with various economic crises, exacerbating concerns and insecurity among business owners.

This survey, the ninth in a series of quarterly Business Confidence Surveys by Gallup Pakistan, provides an essential barometer for capturing the sentiments of the business community in any country. It is widely used by policymakers worldwide. The survey involved approximately 520 businesses across Pakistan. All three indicators of the survey showed negative values, indicating that more businesses lacked confidence in the business situation of Pakistan. Although there was a slight decrease in the number of businesses lacking confidence in the current quarter, the overall trend has been downward since the end of the previous year.

Bilal Ijaz Gilani, Executive Director of Gallup Pakistan and the primary architect of the Gallup Pakistan Business Confidence Index, commented, “Businesses in Pakistan are facing multiple challenges: historically high inflation eroding consumer purchasing power, political instability causing widespread despair not only among the business community but also among their customers, and an ongoing looming threat of sovereign default. In our decades of monitoring the pulse of the business community in Pakistan, we have not witnessed such dire times.”

Approximately 66 percent of businesses perceive themselves as facing bad or worse conditions, with a 7 percent increase in businesses reporting very bad business conditions. The Gallup Pakistan Business Situation Net score showed a slight decline in this quarter. Around 70 percent of businesses perceive unfavorable conditions in Sindh and KP, and 64 percent in Punjab. Most business sectors reported being in a challenging state, with the construction, cosmetics, and industrial machines/equipment sectors showing a 50-50 split between good and bad conditions.

In terms of future expectations, 7 percent more businesses in the current quarter believe their businesses will fare worse in the future compared to the previous quarter. In Q1 2023, 61 percent expressed negative future expectations, while only 38 percent anticipate any improvement. The Net Future Business Confidence score has worsened by 11 percent since the previous quarter and now stands at -22 percent.

Perceptions of the direction of the country among the business community remain consistent with the previous quarter, with negative perceptions reaching an all-time high. A staggering 90 percent of businesses surveyed believe that the country is headed in the wrong direction.

Similar to the fourth quarter of 2022, inflation remains the most commonly cited problem in this quarter, with 45 percent of businesses expecting the government to address it. Compared to the previous quarter, 10 percent more businesses are seeking government assistance with currency depreciation, while 7 percent fewer businesses believe the government should provide relief on utility prices.

Regarding workforce dynamics, over half (57 percent) of the businesses surveyed did not undergo layoffs in the last quarter, but 38 percent reported a decrease in their workforce during that period. Additionally, 58 percent of businesses reported raising average output prices in the last quarter, with 45 percent increasing prices by 20 percent to 50 percent. Concerns about Pakistan’s potential default were expressed by the majority (72 percent) of businesses surveyed, with nearly half (49 percent) expressing significantly high levels of concern. However, 17 percent of respondents in the survey indicated no concerns at all.

In terms of infrastructure challenges, 44 percent of businesses reported experiencing daily load shedding this quarter, which is a 28 percent decrease compared to the previous quarter. Among businesses affected by load shedding, nearly three out of four (73 percent) reported facing four hours or less of power outages every day, compared to the previous quarter when a similar proportion of businesses (77 percent) reported experiencing 5-6 hours or less. Surprisingly, more than three-quarters of the businesses surveyed have yet to establish a digital presence. A significant 76 percent do not have a WhatsApp for business account, 86 percent do not have a website, and 85 percent do not have a Facebook account.

These findings highlight the prevailing challenges faced by businesses in Pakistan. The combination of political instability, economic crises, high inflation, and the looming threat of sovereign default has created a pervasive sense of uncertainty and pessimism within the business community. The lack of confidence in the present business situation and the negative future expectations indicate a pressing need for targeted interventions and policies to alleviate the burdens faced by businesses.

As the Gallup Pakistan Business Confidence Index reveals, the overall sentiment among business owners is one of deep concern and apprehension. It is crucial for policymakers and stakeholders to take these insights into account and work towards creating a more stable and favorable business environment. By addressing issues such as inflation, political stability, and access to digital platforms, steps can be taken to restore confidence and stimulate economic growth in Pakistan.

The road ahead may be challenging, but with concerted efforts and strategic measures, there is hope for revitalizing business confidence and fostering a resilient and thriving business sector in the country.