Gallup Business Confidence Index Drops to Lowest Level

The Gallup Business Confidence Index has dropped to the lowest level owing to inflation, load-shedding, and a general lack of confidence, among other variables worrying the business community.

Entrepreneurs are also getting increasingly pessimistic about the conditions of their businesses due to the country’s political and economic situation.

According to a Gallup Pakistan survey conducted in the last quarter of 2022 for the Gallup Business Confidence Index, 65 percent of business owners believe their businesses are facing bad conditions. Of all business types, industrial machine businesses are doing the best, with 75 percent expressing that the conditions are good, while cloth and garment shops are experiencing the worst level of confidence, with 81 percent saying business conditions are bad.

Findings from the survey show the Net Future Business Confidence score has worsened by 50 percent since the beginning of 2022 and is now at -10 percent.

Compared to earlier this year, the number of businesses saying the country is headed in the wrong direction has gone up by 32 percent. Less than 15 percent of businesses in Punjab, Sindh, and Khyber-Pakhtunkhwa believe that the country is headed in the right direction, while a quarter of the businesses in Balochistan believe the same.

Similar to the findings of the survey conducted in the first quarter of 2022, inflation remains the most-cited problem that businesses would like the government to tackle by the end of this year.

The survey shows that as many as 72 percent of the businesses surveyed reported experiencing load shedding every day. The fourth quarter saw a significant increase in the number of businesses experiencing load-shedding, with approximately 19 percent of those reporting load-shedding within a day experiencing it for two hours.

As many as 81 percent of businesses believe the court system is not fair, impartial, or uncorrupted, compared to 7 percent in the first quarter of 2022. More businesses from Balochistan disagree with the idea that the court system is fair, impartial, and uncorrupted than in any other province, survey results showed.

Almost a quarter (26 percent) of the businesses polled reported that tax officials did not visit or inspect their establishments. Just a quarter of businesses reported that their establishment was visited by tax officials, 12 percent less than in the previous wave. In both quarters, tax officials failed to visit over half of the businesses.

Current Business Conditions

A sample of more than 700 business owners and managers across Pakistan were asked how well their businesses were doing. After COVID-19 peaked, businesses started to express greater confidence. But this confidence plummeted between the beginning and the end of 2022.

The report suggested that the sudden change, and a 63 percent fall in the Current Business Situation score, may be due to the continuous political instability over the year.

Future Expected Business Conditions

The survey asked business owners their expectations for the future of their businesses compared to the past and found that businesses have been growing increasingly pessimistic about the future. The survey states that 56 percent of the sample in Q4 said future expectations are negative, while only 45 percent expect things to improve at all. The Net Future Business Confidence score has worsened by 50 percent since the beginning of the year and is now at -10 percent.

The survey asked business owners which problems were affecting their businesses considerably. Besides inflation, “customer shortage” was a problem that 8 percent of them faced. High taxes were also seen as a problem by 4 percent of businesses.

“Gallup Business Confidence Report for the fourth quarter of 2022 paints a bleak picture. The index values are the worst since Gallup started the project in 2019, which includes Covid-19 times,” said Bilal Ijaz Gilani, executive director of Gallup Pakistan and chief architect of the Gallup Pakistan Business Confidence Index.

“The report comes after Pakistan faced the worst floods in decades. The business community awaits strong and decisive steps by the government,” he added.