From the lowest ever ratings for business confidence in June, to the joint highest in August, the journey was quick. The State Bank of Pakistan’s Business Confidence Survey shows the overall Business Confidence Index (BCI) jumping to the green zone after three consecutive waves of negative BCI.

And it should not entirely come as a surprise (see: Business Confidence – mixed signals, published August 6, 2020). Pakistan’s rather stunning turnaround of the coronavirus has certainly played a key role in turning the tide. Recall that the previous wave was conducted when the cases were rising, and the situation was precarious. And the August wave was done while Pakistan had successfully rid the peak and was witnessing one of the most dramatic bend and flattening of the curve across the world

The macroeconomic indicators too have been on the mend, with massive improvements in exports, current account surplus, continuation of single-digit inflation, low interest rates, record high remittances and so on. Much of the improvement owes to a massive surge in the expected business confidence for the coming six months, as the current business confidence remains in the red zone.

That said, even the current business confidence has risen from the ashes, improving by one-third over the previous wave. The current confidence is a measure of the responses based on the factors of the previous six months, and the result seems hardly surprising. What is encouraging is the second-best reading and the best during PTI’s 2-year tenure, for the Expected Business Confidence at 64. This is up by 15 percentage points from the June wave – easily the highest ever wave-on-eave jump.

It must be added that Pakistani businesses have almost always, barring an exception, held considerably positive views of every next six-month period. The optimism is clearly reflected in all waves, where the confidence in the next six months has been significantly higher than the previous six months.

The positivity has also extended to the Expected Employment Index, which has jumped by 7 percentage points to 57. The difference from the Current Employment Index stands at 10 percentage points, clearly indicating that businesses have a generally positive views of generating more employment in the next six months, and the lost jobs during the pandemic may soon be filled.

The negativity has visibly gone down, with only 7.5 percent respondents carrying negative or extremely negative views on the future, which is a sharp improvement from 32 percent respondents carrying negative to extreme negative views in June 2020. The Purchasing Managers Index (PMI) continues to be in the negative zone, although it improved from the previous wave. It must be noted that the PMI does not look into the future and only tracks the past six months performance, confined only to industrial sector. Form where things are, the BCI should continue its journey north in the next wave or two.