BOI report shows a drop in business optimism

Noor Haider
BOI report shows a drop in business optimism
BOI report shows a drop in business optimism

According to Business Optimism Index report published by Dun & Bradstreet Pakistan, business optimism has declined across the board after growing steadily for the past three quarters.

Tell me more: Dun & Bradstreet is a U.S.-based company that provides commercial data, analytics, and insights for businesses.

It publishes quarterly reports on the Business Optimism Index in Pakistan through its Pakistan affiliate.

By the numbers: The BOI registered 143.9 points in Q4 2021 compared to 154.2 points in Q3 2021.

A decline of 6.7% quarter-over-quarter (QoQ). However, this is an improvement of 7.9% compared to the same period last year.

The overall downtrend drove the decline in optimism in the macroeconomic indicators, which include:

  • high inflation rate of 12.3% in December last year
  • current account deficit widening by 57.9%
  • policy rates increasing from 7.25% to 9.75%
  • depleting foreign exchange reserves from $25.6 billion to $24 billion
  • PKR depreciation against the US Dollar by 4.5% during Q4 2021

The sector-wise comparison in the report shows a decrease in BOI in:

  • Trading Sector Index: decreased by 18.7% QoQ, from 160.9 in Q3 to 130.9 in Q4
  • Manufacturing Sector Index: decreased by 3.5% QoQ, from 147 in Q3 to 141.8 in Q4
  • Services Sector Index: decreased by 4.4% QoQ, from 157.1 in Q3 to 150.2 in Q4
  • SMEs Index: declined from 162.5 in Q3 to 146.2 in Q4
  • Exporter’s Index: declined from 155.0 in Q3 to 154.0 in Q4

The most significant drop in optimism happened in the trading sector.

The index-wise comparison showed that Large Companies Optimism declined from 162.5 in Q3 to 146.2 in Q4.

There’s more: In the previous six quarters, the top challenge was COVID-19-related disruptions, which have been replaced by inflation and high-interest rates.

The other challenges listed were:

  • rising cost of utilities
  • less demand for products & services
  • business regulations
  • the availability of skilled labor
  • higher completion
  • exchange rate fluctuation
  • government taxes
  • high cost of finance

Zoom Out: One thing to note in the report is that the impact of COVID-19 has been less detrimental on sales in Q42021 (32%) compared to Q32021 (38%).

And even though the report shows a QoQ decline in BOI for trading, manufacturing, and services sector index, the index increased by 5.3%, 8%, and 5.3% on a YoY basis for each sector, respectively.

Before you go: Dun & Bradstreet conducts a survey every quarter to gauge the overall sentiments of businesses in the country.

The survey shows that 59% of the respondents expect the business situation to improve in Q12022.

The previous quarters’ reports can be viewed on the company’s website.

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