LAHORE: Economic conditions remain uncertain in Pakistan despite businesses benefiting from a series of aggressive rate cuts since the late 2014, says the latest Global Economic Conditions Survey (GECS) 2016.

“In Pakistan, economic sentiment is being hurt by ongoing security problems, with business confidence in Q1 remaining low compared with most of last year and compared with its sub-continent neighbours,” says the GECS from the Association of Chartered Certified Accountants (ACCA) and Institute of Management Accountants (IMA).

However, Pakistan-based respondents point to an economic gain from the eventual implementation of the China–Pakistan Economic Corridor (CPEC), a bilateral project that would involve hefty Chinese investment into Pakistan’s infrastructure network.

Fieldwork for the Q1 2016 GECS took place between February 26 and March 15 and attracted more than 1,200 responses from ACCA and IMA members around the world, including more than 100 chief financial officers (CFOs). Nearly half of the respondents were from small and medium enterprises, with the rest working for large firms of more than 250 employees.

The GECS found that globally more than half of firms were either cutting or freezing employment while only 1pc were increasing investment in staff.

Almost half of global businesses reported a drop in income in Q1. As a result, every region except North America saw a jump in the number of businesses cutting capital expenditure. With emerging economies continuing to struggle with low commodity prices and many businesses on a spending lockdown, the outlook for the global economy is becoming increasingly gloomy.

Commenting on the GECS, the ACCA’s head of business focus Faye Chua said that it was the emerging markets suffering most from bottom lines being squeezed.

“Wages are rising rapidly in many parts of the world and businesses are finding it harder to cope as revenues come under increasing pressure. The sharp drop against the dollar experienced by many currencies will also have pushed up costs, making imports more expensive and raising the value of dollar-denominated debts, meaning that firms in emerging-market economies are very pessimistic about their prospects,” said Chua while warning that global policymakers could be running low on ammunition in the fight to turn things around.

“In developed economies, governments have worked hard to stabilise their debt-to-GDP ratios. Will they want to reverse that good work and risk the wrath of bond investors? It’s highly unlikely. Instead, we’ll see the heavy lifting left to central banks in the main. The problem with this approach is there are serious doubts around their ability – or indeed inclination – to provide more support,” said Faye Chua while adding that pulling the global economy out of the doldrums was not going to be achieved in the short term.

“Once income begins to drop and businesses stop hiring, getting them to a point where they are confident enough to begin doing so again is difficult - but vital. The one positive is business confidence in non-OECD economies did pick up slightly in Q1, led by central and eastern Europe - and Russia in particular. Let’s hope that is a sign of more positive news to come,” said Faye Chua.

Published in Dawn, April 20th, 2016