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Businesses were short on confidence in June 2020. And there was every reason for that as Pakistan’s coronavirus cases and deaths were marching towards the peak – and the situation was very grim. The Business Confidence Index as measured by the State Bank of Pakistan through bi-monthly surveys – remains deep in the negative zone.

This should hardly be surprising given that last eight of the ten waves, covering the entirety of the PTI government tenure, have seen the business confidence in the negative territory. Throw in the coronavirus, and the drop in business confidence seems justified. It does appear though that businesses had a better reading of the pandemic trajectory back in June than most observers – raising their hopes by 1 percentage point.

In situations as fluid as the current one, it could be misleading to overread the findings of surveys such as this. Looking at the time series, one could infer that businesses have generally had a negative sentiment about the current situation and are always more hopeful of what the future holds.

Every single BCI wave since the survey’s inception has confirmed this trend. Only once, in the previous wave in April, was the expected business confidence, at par with the current one. Two months on, the businesses have started to feel better about the next six months.

While April saw the biggest wave-on-wave decline in expected business confidence – June saw the biggest improvement in the same. On the other hand, the grim coronavirus situation led to significantly lower score on the current confidence – with the lowest ever value at 30. It could well be the easing inflation and 500 bps reduction in interest rates, that may well have fueled an improved outlook amongst businesses – just two months on.

The disaggregation shows that extreme negative views on the expected business confidence halved – while those for the current confidence increased considerably. The stark difference between current and expected – continues with the employment as well, where the current index for employment has gone in the negative zone for the first time ever. The expected employment on the other hand has bounced back to neutral territory, having stayed in the negative earlier.

The Purchasing Managers Index dived to its lowest ever reading, and also registered the single largest decline over the previous wave. This is in line with the current employment and confidence trends – as it takes into accounts purchasing activities over the past six months. Pakistan seems to have handled the pandemic rather well, and that should instill more confidence going forward.