LAHORE: The Gallup Pakistan latest survey reveals a stark decline in business confidence among the country’s business owners, who now view Prime Minister Shehbaz Sharif’s government as an even worse economic manager than its predecessor.

The continued political turmoil and the introduction of a tax-heavy budget have further exacerbated their pessimism about the future.

The Gallup Business Confidence Index, which surveyed 454 small, medium, and large businesses across more than 30 districts in the second quarter of 2024, showed negative values for all three key indicators: the current business situation, future business situation, and the direction of the country. The scores for these indicators declined by four to 10 per cent and highlighted the deteriorating sentiment among business owners.

The survey found that a significant number of businesses consider the government’s new financial plan for FY25 to be unfriendly to business. About two in five businesses identified inflation as their most pressing issue. Inflation soared to 12.6pc in June, severely eroding consumers’ purchasing power and placing additional strain on businesses.

Gallup surveys 454 businesses in over 30 districts; 66pc of manufacturers report worse sales this year

Over half (54pc) of the surveyed businesses think that the current Pakistan Muslim League-Nawaz government is worse than the previous dispensation in managing the economy.

“Owing to continued political uncertainty and the recently announced heavy-on-taxation federal and provincial budgets have had a significant impact on business optimism in the country,” said Bilal Ijaz Gilani, an executive director at Gallup Pakistan and chief architect of Gallup Pakistan Business Confidence Index.

The business community, already burdened with various regulatory measures and taxes, expressed serious concerns about the new budget, he said.

The number of businesses seeking government interventions to resolve taxation issues has risen considerably since the first quarter due to the increased taxes imposed in the latest budget.

The survey also highlighted the issue of the loadshedding with six out of 10 businesses facing crippling power outage. This quarter 16pc more businesses reported an increase in power outages due to heavy load on power infrastructure during the summer. Overall, 61pc of businesses reported experiencing loadshedding.

Asked how well their businesses were doing, the owners and managers said the national and global challenges had made economic security a distant dream in Pakistan. Consequently, the net current business situation score fell by 16pc in the second quarter of 2024.

Looking to the future, 57pc of businesses expressed negative expectations while 43pc expect conditions to improve. The net future business confidence score has worsened by 36pc since the last quarter and is now standing at 14pc.

Pessimism was particularly prevalent among businesses selling hardware and tools, electrical items, and manufacturing products. Conversely, businesses selling home decor and accessories, gift items like toys and sports-related goods and cosmetics were among the most optimistic.

The net direction of the country score also declined, dropping to 64pc, a decrease by 4pc points from the previous quarter. “Only 18pc of respondents believed that the country was heading in the right direction,” the report said.

A majority of businessmen (54pc) rated the current economic managers from the PML-N government as worse than those in the previous government. Twenty-three per cent respondents from the manufacturing sector viewed the economic performance of current and previous governments as the same.

The survey revealed a sweeping majority of businessmen (85pc) do not consider the government’s new financial plan as a “good budget”. Only 11pc of the manufacturers and 15pc service providers found the budget to be business friendly.

Owing to high inflation and poor business conditions, nine per cent more employers, particularly manufacturers, had to decrease their workforce in the second quarter. Additionally, 60pc of businesses reported worse sales this year, with manufacturers (66pc) reporting worse sales compared to service providers (58pc).

“Governments in Pakistan need to listen and address the voice of business communities across the country,” said Gilani.

Published in Dawn, July 26th, 2024