EDITORIAL: Prime Minister Shehbaz Sharif has expressed satisfaction at the Gallup poll survey’s conclusion that business confidence is at a four-year high — a surge directly attributable to his administration’s handling of the economy. This is no mean achievement especially considering that the incumbent economic team leaders, like their predecessors, have repeatedly noted that private sector is the engine of growth.
The score was marginally negative in the second quarter of 2025 but marked the highest level of confidence since the fourth quarter of 2021 which the Survey noted, “suggests a moderate easing of political and economic uncertainty from the perspective of the business community.” In this context, it is relevant to point out that perhaps the comparison is unfair given that in 2021 the country (as well as the global economy) was in the midst of a recurring Covid-19 onset with severe implications on economic activity.
However, it is noteworthy that the Monetary Policy Statements for the past year projected an uptick in output with the 31 July 2025 Statement reiterating this claim: “high-frequency economic indicators are depicting a gradual economic recovery. This is reflected in notable y/y growth in automobile sales, fertilizer offtake, credit to private sector, imports of intermediate goods and machinery, and purchasing manager’s index in recent months. This improvement in high frequency indicators has now also started to reflect in LSM data, which showed y/y increase in both April and May after five months of contraction.” And yet the Finance Division’s July Economic Update and Outlook, a monthly exercise, shows Large-Scale Manufacturing (LSM) July-May 2025 growth rate at negative 1.21 percent against 0.86 percent in the comparable period the year before — data that unambiguously challenges the claim of a four-year high. As noted in the MPS for end July the rise in sales in a number of products was, as per independent economists, rooted in higher sales and a consequent reduction in inventories rather than an uptick in output.
Be that as it may, it is relevant to note the five major findings noted by the Gallup poll: (i) forward looking confidence of the business community has plateaued and long standing challenges including inflation, energy reliability and governance remain central to the country’s business climate; (ii) 55 percent of businesses in the second quarter of 2024 (October to December 2024) found themselves worse off relative to the first quarter of 2024 (July-September 2024) — an observation that is baffling given that the survey was conducted 23 July to 27 July 2024 or well before the start of the second quarter of 2025 and does not include the May and April LSM data that the MPS stated as indicative of an upward trend; (iii) around one in five businesses (22 percent) reported having to pay a bribe in the past six months which is a decline of 4 percent in the first quarter of 2025. And concerning is the fact that more manufacturers reported having paid a bribe (25 percent) compared to service providers (20 percent); (iv) 43 percent of businesses surveyed claimed that their workforce had decreased in the second quarter of 2025, a 9 percent further reduction from the first quarter data — a concerning statistic for the government; and (v) around 85 percent did not consider last year’s budget as a good budget while reports backed by anecdotal surveys indicate that the numbers who do not consider 2025 budget a good one has probably risen given that the incentives — monetary, fiscal and utility tariffs — have been withdrawn as per the conditions agreed with the International Monetary Fund which is generating considerable criticism within the business community.
To conclude, granted that surveys have an experimenter bias and the questions simply support that bias yet the economy is clearly not out of the woods yet and the private sector continues to struggle with the IMF insisting on full-cost recovery of state utility companies, ending all incentives, including setting up economic zones, and implementing severely contractionary fiscal and monetary policies that are anti-growth.
Copyright Business Recorder, 2025
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