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There’s more: In the previous six quarters, the top challenge was COVID-19-related disruptions, which have been replaced by inflation and high-interest rates.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