Business Optimism for current quarter better than what was witnessed during lockdown: D&B

August 12, 2020: Dun & Bradstreet (D&B) has shared the third edition of the Pakistan Business Optimism Index (BOI), wherein it conducted its BOI survey for Q2, 2020 from 1st June to 30th June, 2020 to gauge business sentiments for the current quarter as well as expectations about business performance in the following quarter.

During Q2, 2020, Pakistan’s economy continued to witness large-spread business disruptions due to the complete lockdown implemented from 23rd March 2020 till 18th May 2020. Subsequently, a ‘smart lockdown’ was announced in June, under which only the most affected areas were closed off. Specific businesses located outside of the closed off areas were allowed to operate normally, provided there was strict adherence to Standard Operating Procedures (SOPs) issued by the government, which outlined social distancing guidelines and preventive measures to control the spread of the virus.

Post easing of the lockdown, respondents are now hopeful that the COVID-19 cases will decline, and that economic activity will gradually return to normal compared to the complete standstill witnessed in the initial phase of the lockdown. Consequently, the Business Optimism for the current quarter is better than what was witnessed when the lockdown was imposed.


To accurately assess the impact of the lockdown, the BOI survey results pre and post lockdown were analyzed separately. The responses collected before the lockdown (during which the businesses were operating normally) indicated high optimism, and a BOI score of 141.1. Compared to this, the BOI for Q2, 2020 declined by 28.3 points.

After the lockdown was imposed, business activity came to a standstill as only essential businesses were allowed to operate. The responses collected after the lockdown indicated significantly lower optimism, and a BOI score of 85.6. Compared to this, the BOI increased by 27.2 points in Q2, 2020 indicating higher optimism owing to lower uncertainty regarding the resumption of business activities.

The Large Companies Optimism Index and SME Optimism Index have both declined in Q3, 2020. However, at an aggregate level both indices are above 100, indicating overall optimism. In contrast, the Exporter Optimism Index increased from 116.0 to 141.5.

Service sector indicated pessimism for Q3, 2020 with a BOI of 93.7 whereas, BOI for Manufacturing sector increased by 5.9 points to 125.9.


Respondents expect forecast business performance to improve in Q3, 2020 and anticipate higher demand. This expectation is driven by confirmation of previously delayed orders, as well as respondents’ belief that demand will gradually increase.

In addition to the direct impact on local businesses and decline in demand, the COVID-19 pandemic has further affected businesses due to exchange rate fluctuations. PKR depreciated against the USD as PKR/USD stood at 168.05 on June 30, 2020 compared to 166.70 on March 31, 2020.

Economic activity was significantly hampered during the lockdown phase since only essential businesses were allowed to operate and others were at a standstill, resulting in deterioration of business, and business sentiments. However, businesses were more optimistic after the Government of Pakistan lifted the ~1.5-month lockdown and switched to a ‘Smart Lockdown’ in areas that were hotspots for COVID-19 cases. Businesses are now hopeful that the situation will return to normal as economic activities resume and have cited improvement in business matters due to an expected increase in Sales Volume and consequently, Sales Revenue

Large companies were relatively more optimistic than SMEs with respect to all the parameters. During the ‘smart lockdown’, selected sectors such as construction and textile were allowed to resume operations while high-risk sectors such as tourism and education were not allowed to operate.

The Manufacturing sector anticipates higher Sales Revenue, Sales Volume, and Employment Size compared to the Trading and Services sectors in Q3, 2020. The Trading sector anticipates higher Profits and Selling Prices compared to the other sectors while the Services sector showed negative Net Balance for all the parameters except Selling Prices. On average, the Manufacturing sector was relatively more optimistic than the Trading and Services sectors.

Business disruptions caused by the lockdown due to COVID-19, exchange rate fluctuation and the reduced demand for products and services were cited as key challenges affecting business growth.

61% of exporters expect an increase in export orders in the next quarter, while 18% of respondents plan to export to new markets. Top three new export destinations cited by the respondents are UAE (20%), KSA (18%) and China (10%) compared to the UAE (34%), USA (29%) and Canada (20%) in Q2, 2020.


Positive Net Balance across all parameters except Employment Size indicates that businesses are overall optimistic for the upcoming quarter. However, for Q3, 2020, respondents anticipate lower Sales Revenue, Employment Size and Profits, compared to Q2, 2020, indicating relatively lower optimism.

54% of the respondents expect stability in prices while 23% expect an increase due to the PKR devaluation. The Net Balance for Employment Size decreased to -01% q-o-q for Q3, 2020 from 16% during the last quarter.

Outlook for Sales Volume is the only parameter that increased on q-o-q basis as the Net Balance registered an increase from 25% in Q2, 2020 to 26% in Q3, 2020. 53% of the respondents expect an increase in Sales Volume due to higher demand as businesses resume operations.

Furthermore, respondents’ expectation with regards to Profit declined on q-o-q basis as the Net Balance decreased from 20% in Q2, 2020 to 13% in Q3, 2020. However, 59% anticipate profit will increase or remain unchanged as they believe sales will increase in the upcoming quarter


The Manufacturing sector is the most optimistic with respect to Sales Revenue and Sales Volume, with a Net Balances of ~50% for both parameters. Businesses in food & beverages and textile manufacturing sub-sectors are most optimistic.

Businesses in the Manufacturing sector are overall more optimistic for Q3, 2020 compared to the last quarter which is reflected in a higher Net Balance across all parameters.

63% of the respondents expect an increase in Sales Volume as the Net Balance doubled from Q2, 2020 to Q3, 2020. Higher Sales Revenue and Sales Volume is anticipated due to higher demand for products.

The Manufacturing sector outlook for Employment Size declined marginally on q-o-q basis as Net Balance declined to 14% in Q3, 2020 compared to 17% in Q2, 2020.


For Q3, 2020, a higher percentage of Trading sector businesses expect an increase in prices compared to other sectors, with a Net Balance of 34% compared to 14% in Q2, 2020. Increase in prices is anticipated to be driven by exchange rate deterioration.

The Net Balance for Selling Prices increased from 14% in Q2, 2020 to 34% during Q3, 2020 with respondents citing exchange rate fluctuation as the key reason for the increment.

Net Balance for Profits also increased from 26% in Q2, 2020 to 38% in Q3, 2020 driven both by increase in Prices and Sales Volume since economic activity has resumed.

Optimism regarding Sales Revenue and Sales Volume was relatively unchanged compared with Q2, 2020 as businesses believe that demand for goods/ services will increase in Q3, 2020.

24% of the respondents expect a decrease in Employment Size during the upcoming quarter due to the lay-offs because of the reduced economic activity during the pandemic.


Services sector is the most pessimistic for Q3, 2020, reflected by negative Net Balances across all parameters except for Selling Prices. Service sector business such as hotels, schools and restaurants continue to remain on lockdown and mentioned inability to achieve sales targets due to the pandemic.

Businesses in the Services sector are less optimistic for Q3, 2020 compared to the last quarter; they are least optimistic regarding Profits due to decreased sales with Net Balance declining to -22% compared to 11% in the previous quarter.

Selling Prices was the only parameter with a positive Net Balance as 21% of the respondents expect an increase in prices due to the devaluation of PKR against the USD.

Moreover, 65% of the respondents anticipate Employment Size to remain constant as majority mentioned that they are retaining their current workforce


During the current quarter, 70% of the respondents claimed business disruptions due to lockdown as a major factor affecting growth. Over 30% of the respondents were impacted by exchange rate fluctuation and decrease in demand.

Key business challenges highlighted issues perceived by businesses at the end of Q2, 2020 that are likely to impact near term business growth and development.

According to the results, 70% of the respondents cited COVID-19 as the biggest challenge since the businesses were not allowed to operate during the lockdown.

Exchange rate fluctuation was the second biggest challenge faced by the businesses followed by reduced demand due to COVID-19.


SME index registered a decline of 11.4 points q-o-q to 107.1 points in Q2, 2020. SME index was lower compared to large companies’ index for all parameters due to lower business optimism, especially in the Services sector.

SMEs were less optimistic compared to large companies as the Large Companies Index stood at 116.7 points (down 5.3 points q-o-q). A lower index for SMEs was largely due to relatively lower business optimism amongst Service sector SMEs.

Although, Net Balances for SMEs declined across all the parameters for Q3, 2020 compared to Q2, 2020, Sales Revenue witnessed the greatest decline, from a Net Balance of 24% in Q2, 2020 to 8% in Q3, 2020.

Net Balance for SME Forecast Business Situation declined for the upcoming quarter (Q3, 2020) to 10% against 18% in Q2, 2020.

Top factors hindering SMEs’ growth in Q2, 2020 included business disruptions due to COVID-19 (69%), inflation (37%) and exchange rate fluctuation (36%).

Only 15% of SMEs expressed willingness to export to new markets in Q3, 2020, compared to 26% in Q2, 2020. The UK and USA were cited as the most lucrative markets with 23% and 18% respondents planning to export to these countries, respectively


The Exporters Index was calculated at 141.5 points for Q2, 2020, up by 25.5 points q-o-q. Exporters have displayed stronger forecast than domestic-market oriented firms across all the parameters.

Exporters were optimistic with respect to all parameters registering a positive Net Balance in each parameter. Net Balances for Sales Revenue, Sales Volume and Profits were over all over 70%.

Based on the survey results, Net Balance for forecast export performance for the upcoming quarter (Q3, 2020) was 33%, compared to 23% in the previous quarter (Q2, 2020) as exporters are hopeful that international trade will resume.

Top three export destinations for exporters included the UAE (34%), the USA (29%) and Canada (20%) in Q2, 2020 whereas, in Q1, 2020 top export destinations included the USA (42%), UAE (31%) and UK (16%).

54% of exporters expressed willingness to export to new markets in Q3, 2020, compared to 73% in the previous quarter. Amongst businesses surveyed, the UAE, the KSA and China were the most popular new export markets with around 10% of respondents willing to export to each of these countries.

Top factors hindering exporters growth in Q2, 2020 included COVID-19 (82%), exchange rate fluctuation (37%), and inflation (28%).

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Posted on: 2020-08-12T11:44:00+05:00