Business sentiment in Pakistan rebounds to pre-Covid levels: D&B

KARACHI: The Business Optimism Index (BOI) for Pakistan increased from 112.8 points in the second quarter (Apr-June) of 2020 to 146.5 points in the third quarter (July-Sept).

According to Dun & Bradstreet’s ‘Business Optimism Index’ report, business sentiment among local firms in Q32020 rebounded to pre-Covid-19 levels, mainly on account of resumption in economic activity amid gradual reopening of economy.

All indices remained in the optimistic range during the period under review (between 141.1-149.4 points) and depicted a strong growth, barring Exporter Optimism Index which remained relatively flat.

The SME Optimism Index reached 142.2 points while the Large Companies Optimism Index rebounded to Q42019 level of 149.4 points.

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Businesses across all sectors remained optimistic during the third quarter. Services sector experienced the highest increase of 52.8 points on a QoQ basis and reached 146.5 points. Moreover, trading and manufacturing sectors’ BOIs improved by 26.4 points and 19.2 points QoQ, respectively.

A greater number of participants felt their sales revenues, selling prices, sales volumes, employment size and profits would increase in the near future. As many as 72pc of the respondents expected an increase in sales volume due to higher demand; 35pc businesses expected price stability; while 45pc predicted an increase in selling price due to the PKR devaluation and to cover up the losses incurred during lockdown.

The manufacturing, trading and services sectors are expected to remain optimistic for the fourth quarter of 2020 with the trading sector expected to remain most optimistic, driven by the resumption of business activities and gradual lifting of lockdowns.

The net balance for forecast business situation (Q42020) highlighted optimism; net balance increased to 67pc compared to 7pc for the business situation in the current quarter, indicating significantly higher optimism in the coming months.

Business disruptions due to Covid-19 and exchange rate fluctuations remain the biggest challenges to businesses that hindered their growth in the third quarter of 2020.

Owing to Covid, the SME sector faced difficult times. This was reflected by the SME Optimism Index, increasing 35.1 points QoQ to 142.2 points. SME Optimism Index is lower compared to Large Companies Optimism Index for all parameters due to lower business optimism, especially in the manufacturing sector.

The Exporters Optimism Index was calculated at 141.1 points for Q32020, down by 0.4 points QoQ. Exporters indicated a weaker forecast than domestic-market oriented firms across all parameters.

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Ariba Shahid
The author is a business journalist at Profit. She can be reached at [email protected] or at twitter.com/AribaShahid

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