Top managers of large firms say they intend to create more jobs in the next six months because Pakistan’s economy is looking up, says the State Bank of Pakistan’s business confidence survey October 1.
“Encouragingly, firms in our survey are planning to hire more employees in the next six months,” the State Bank of Pakistan said in the August edition of its bi-monthly survey, which obtains the opinion of business leaders in 500 firms from industry (manufacturing, construction, retail and wholesale trade) and services sector.
The survey shows what top managers of large companies think about production, employment, demand for credit and economic conditions. It is their perception of current and expected business conditions and what factors influence these conditions.
“This is a positive sign for the growth and employment prospects for the new fiscal year,” the SBP said.
The findings of the SBP’s latest survey, which was conducted in August with the help of the Institute of Business Administration, Karachi, show a positive trend for employment, but the central bank’s latest monetary policy shows the economy is heading for a slowdown.
On September 29, the central bank increased its policy rate to make commercial borrowing more expensive. Expensive loans means businesses may put a stop to new investment (other than necessary ones) and the government will borrow less and do fewer projects, which will translate into a slowdown in job creation.
The recent macroeconomic policies are geared towards achieving economic stability and are likely to affect large-scale manufacturing (factories). Economic activity may slow down in the financial year ending June 2019, the SBP said.
The economy is facing a double challenge. The government is spending more than it makes, which means every year there is a Rs2.2 trillion loss or deficit. Adding to this problem is the fact that our monthly imports exceed our exports by $2.7 billion. This double loss, coupled with rising inflation, is likely to “compromise the sustainability of the high real economic growth path,” the central bank said on Saturday.
The SBP business survey is based on current and expected economic conditions, which are then combined to produce an overall Business Confidence Index (BCI).
The current business confidence index (business leaders, perception of existing economic and business conditions) has fallen below 50 on a scale of 100 for both the industry and services sectors. This means there are more negative views regarding the economic situation over the last six months. “There is also some marginal deterioration in perceptions regarding production and employment,” the report says.
However, when it comes to expected economic conditions, the business community maintains a positive perception, which resulted in an overall positive outlook.
In the August edition, the overall BCI remained slightly positive at 55 on a scale of 100 points, the report said. This is slightly improved from the last survey (conducted in June) when the score was 51.
“This positive perception of businesses is relatively more pronounced for the services sector than industry,” the SBP said.
According to the survey’s findings, the share of firms with positive views of the economic and business environment and for the economy and business conditions in the next six month is significantly higher in August 2018 compared to June 2018.