ANL 12.80 Decreased By ▼ -0.20 (-1.54%)
ASC 15.02 Increased By ▲ 0.20 (1.35%)
ASL 15.52 Decreased By ▼ -0.23 (-1.46%)
AVN 104.40 Decreased By ▼ -3.65 (-3.38%)
BOP 8.40 Decreased By ▼ -0.03 (-0.36%)
CNERGY 6.13 Decreased By ▼ -0.13 (-2.08%)
FFL 8.90 Decreased By ▼ -0.20 (-2.2%)
FNEL 8.38 Decreased By ▼ -0.27 (-3.12%)
GGGL 12.90 Decreased By ▼ -0.32 (-2.42%)
GGL 19.50 Decreased By ▼ -0.89 (-4.36%)
GTECH 9.07 Decreased By ▼ -0.33 (-3.51%)
HUMNL 6.71 Decreased By ▼ -0.04 (-0.59%)
KEL 3.07 Decreased By ▼ -0.07 (-2.23%)
KOSM 4.07 Decreased By ▼ -0.08 (-1.93%)
MLCF 33.80 Decreased By ▼ -0.50 (-1.46%)
PACE 3.98 Decreased By ▼ -0.15 (-3.63%)
PIBTL 7.17 Decreased By ▼ -0.06 (-0.83%)
PRL 14.08 Decreased By ▼ -0.36 (-2.49%)
PTC 8.55 Decreased By ▼ -0.11 (-1.27%)
SILK 1.27 Decreased By ▼ -0.05 (-3.79%)
SNGP 33.76 Decreased By ▼ -0.40 (-1.17%)
TELE 17.05 Decreased By ▼ -0.69 (-3.89%)
TPL 11.80 Decreased By ▼ -1.17 (-9.02%)
TPLP 26.65 Decreased By ▼ -1.87 (-6.56%)
TREET 38.40 Decreased By ▼ -1.25 (-3.15%)
TRG 77.20 Decreased By ▼ -5.65 (-6.82%)
UNITY 27.49 Decreased By ▼ -0.36 (-1.29%)
WAVES 15.43 Increased By ▲ 0.33 (2.19%)
WTL 2.13 Decreased By ▼ -0.08 (-3.62%)
YOUW 7.34 Decreased By ▼ -0.43 (-5.53%)
BR100 4,610 Increased By 11.6 (0.25%)
BR30 17,620 Increased By 286.2 (1.65%)
KSE100 44,955 Increased By 67.3 (0.15%)
KSE30 17,738 Increased By 42 (0.24%)

coronavirus
Coronavirus
VERY HIGH
Source: covid.gov.pk
Pakistan Deaths
29,137
1524hr
Pakistan Cases
1,386,348
5,19624hr
Sindh
531,008
Punjab
467,698
Balochistan
34,032
Islamabad
120,813
KPK
186,537

The past two years have been full of surprises, of which the pandemic and the chaos it brought to the world is certainly a dominant one. Aside from its obvious impact on health, lives and livelihoods of people, in a lot of ways, the deadly virus exposed many vulnerabilities in the way economies were running and spending. On a more micro level, it revealed how easily a signal event can have a domino effect and how those effects can linger for a long time. The global supply chain disruption right now—even as economies are opening up—is certainly a forewarning for the future, a warning that no top-dollar earning management consulting firm saw coming. The supply crunch just keeps getting worse, when it was only supposed to be temporary.

For the most part, Pakistan has tackled the pandemic really well. Luck may have a lot to do with it because the virus never really got out of control the way it did in neighbouring countries. The government with NCOC at the helm managed to steer the ship on the dock without massive commotion—vaccines were arranged, bought and administered across the country. To date, 86 million doses have been administered; the daily offtake is over 1 million and the current positivity rate for the virus is 2.6 percent. It seems, with the fourth wave behind us, Pakistan is on the way to have “successfully” tackled the spread. Next week, all educations institutions will resume normal classes, according to the NCOC.

But people are not happy. Tracking SBP’s consumer confidence index since Mar-20, consumers have not been optimistic about the current economic conditions of the country and they haven’t expected to be optimistic either. On the other hand, businesses have not only become more and more confident in the economy, they are also pretty optimistic about the future. When the country was in the throes of the first covid-19 wave, business confidence had slid down into uncertainty and more firms were pessimistic about economic conditions than those that were confident. That soon normalized. By Aug-20, businesses were expecting the economy to rebound. Despite Imran Khan’s obvious support from the grassroots, consumers have taken a harsher stance on the economy and still do not see a major turnaround (important to clarify that this as far as the SBP’s indices are concerned). Meanwhile, the gap between business and consumer confidence has only widened as we have rolled into FY22. Businesses are not only more confident than consumers; they are substantially more confident. (Why? Read more: “O ye, of little faith”, July 29, 2021).

In Aug’s reading, business confidence slightly dropped and the reasons are clear. Massive supply chain challenges, expected cost-push inflation due to commodity and fuel price surge in the international markets, a hike in the policy rate and the depreciating rupee. In July, the SBP was celebrating the robust manufacturing growth, improved inflation outlook and a strong external position. All three of these interconnected measures are under threat. There has been a slowdown in large scale manufacturing, imports are costlier and inflation is up because of food and energy prices. The SBP is now thinking of ways to curb imports and safeguard the balance of payments and it is targeting consumption goods through cash margin requirements and putting locks on consumer financing, specifically imported vehicles.

Invariably, businesses will get affected by the rising cost of inputs (such as coal which has grown by nearly 200% in value) and are already facing inventory challenges as the supply chain situation persists (such as the massive chip shortage affecting automobile and other manufacturing industries). As the global business community grows from (and out of) this experience, it would be smart for Pakistani businesses to not just sit around and wait for the business climate to normalize but to learn from it. Global businesses are certainly thinking along those lines. For instance, adopting better demand forecasting models for more effective inventory planning, exploring alternative supply sources, preparing for plant closures better, identifying key vulnerabilities, focusing on network building etc. (more on this later).

Of the two, consumers are certainly more rattled because they have to feed bellies. They are worried about their depleting purchasing power due to inflationary pressures. This will always be the most pressing concern for consumers spending their hard-earned money and making crucial buying decisions for their households whilst trying to save. On that front, while both businesses and consumers expect inflation to remain high; the latter are more pessimistic between the two and evidently, not hanging any hopes on government policies to help turn that around. Is the government listening?

Comments

Comments are closed.