Business sentiment: it is bad

As things have been on a standstill since much of the second half of March, it’s a no-brainer that “business” is devastated amid the fatal uncertainties surrounding coronavirus. How bad things are isn’t clear as of now, but upcoming data releases next month might tell. For now, the business confidence does not look good at all, as per a recent survey of 500 businesses conducted by Gallup Pakistan.

The 1QCY20 survey shows that businesses were feeling more confident about economy before coronavirus came. This is at odds with SBP’s latest Business Confidence Survey (February 2020) which showed that pre-corona, business sentiment had already declined into negative territory for both services and industries, compared to December 2019. Whichever way sentiment pendulum was swinging pre-corona, the varying degrees of lockdowns were bound to sap spirits, as captured by Gallup Pakistan.

Post-lockdown, business sentiment has dipped considerably in the Gallup survey, with 83 percent of respondents reporting in late March and early April that business was either bad or very bad. This is more than 62 percent of respondents feeling the same in the pre-lockdown era in February. Pessimism is reported the highest among manufacturing sector, garment shops, medical equipment vendors and electronics shops.

While business looks bad during corona, it doesn’t bode well for the future either. Less than 40 percent of businesses seem confident that future will be better than the current conditions. This degree of relative optimism, which is better than current business confidence but still below the 50 percent threshold of net optimism, is the highest among trade-related businesses (48%), followed by fertilizer businesses (44%), garment shops (43%), electronics shops (42%), manufacturing businesses (35%).

Businesses also seem to have qualms over how the country is being managed in these times. (Good to know that coronavirus isn’t considered a hoax, as 94 percent of businesses call it a “serious problem”). Before corona-induced lockdowns, 39 percent of businesses felt that the country was heading in the right direction. Amid lockdowns, that number has shrunk to 30 percent. The survey confirms the intuition that services-related businesses are more pessimistic than their industrial and trading counterparts.

In changing times, the nature of issues facing business community the most also seems to be changing. Compared to pre-corona times, fewer businesses now report having issues with FBR and taxation, and more businesses complained about monetary policy direction and government-business cooperation during the lockdown. While a slew of relief measures have been announced by the government to ease business problems, perhaps a better crisis communication by government can lift sentiment a bit.