THE results of a recent business confidence survey conducted by the Overseas Investors Chamber of Commerce and Industry are a disquieting reminder of just how jittery key stakeholders have become due to the worsening state of the economy. The OICCI’s Business Confidence Score, computed through a countrywide survey, has plunged to negative 4pc from 17pc recorded in March and April. The steep drop has been termed “regrettable, but not surprising” by OICCI president Ghias Khan, who attributes it to “the highly challenging political and economic situation” in the months between the two surveys. Mr Khan cited “high inflation, increased fuel prices and significant currency devaluation” as well as the floods which inundated large parts of the country following this year’s monsoon season as factors that have greatly disrupted economic activity. Overall, more than half of all respondents expressed negative views regarding the business environment over the past six months, and only 2pc had any positive expectations for the next six. It appears from the survey results that it is only a tiny fraction of business leaders in the manufacturing sector who still have hope for a near-term improvement in the economy. On the other hand, the outlook presented by those working in the services and retail and wholesale sectors is overwhelmingly negative. Foreign investors sampled in the survey expressed a confidence level of only 6pc compared to 33pc when the previous survey was conducted. The three biggest challenges identified were inflation, high taxation and currency devaluation. Other key findings indicate that businesses may be considering shelving expansion and investment plans and curbing new hiring.

Confidence surveys are usually reliable indicators of the direction business activity can be expected to take in the near future. Based on the results of this survey, the outlook appears to be quite dire. Unfortunately, the government has either already failed to address the three key concerns raised or is out of policy options to provide relief. For example, after much struggle, it seems to have given up on getting price fluctuations under control — a fact borne out by the persistence of high inflation in recent weeks and months. It also cannot compromise on taxation, as its revenue options have been sharply limited by a massive rejigging of the economy. Lastly, further currency devaluation also seems inevitable considering the pressures building up on the external account, though policymakers are resisting it for political reasons. Expect a rough ride ahead.

Published in Dawn, December 12th, 2022