The new wave of Omicron infections is likely to shake the confidence of the country’s business sector and their recovery from the shocks of the pandemic, according to a survey by the South Asian Network on Economic Modeling (Sanem).
The overall business confidence in January-March 2022 may face a decline in comparison to the last quarter as most of the sectors have expressed growing concern about the advent of Omicron.
It said most of the sectors have expressed lesser confidence for the upcoming quarter.
Dr Selim Raihan, executive director of Sanem revealed these while presenting the findings from the seventh round of the “Business Confidence Index” survey at a webinar titled “New Wave of Covid-19: State of Business Confidence in Bangladesh” conducted by Sanem on Monday.
The webinar focused on the new wave of the Covid-19 pandemic and the state of business confidence in Bangladesh.
In the survey, Sanem calculated three indices like index derived from present quarter data called Present Business Status Index (PBSI), index on the anticipation of business conditions in the next quarter the Business Confidence Index (BCI), and index on the overall business environment called Enabling Business-Environment Index (EBI).
The survey results showed that the Present Business Status Index (PBSI) (year) is approaching the mark of 60 in the October-December 2021 quarter from 56.79 in the earlier quarter, indicating a continuation of improvement.
In the seventh round of the survey, the PBSI (year) index assesses business performance in October-December 2021 over the same quarter of last year. The PBSI (quarter) index assesses business performance in October-December 2021 compared to the immediate previous quarter of July-September 2021.
The BCI index reflects the expectations of businesses for January-March 2022 in comparison to October-December 2021 where six indicators were used to construct the indices: profitability, investment, employment, wage, business cost and sales/export.
Moreover, the EBI index presents the overall business environment for the firms which included the components of electricity (connection and quality), availability of skilled workers, transport quality, business or property registration, access to finance, overall tax system, government support for the industry, management of the Covid-19 crisis, trade logistics (port and customs) and corruption.
According to the survey, PBSI (year) and PBSI (quarter) pointed to an improvement in business activities in October-December 2021 quarter in comparison to July-September 2021 quarter.
Compared year-on-year, RMG, textile, restaurant, food processing, and pharmaceutical sectors have registered a comparatively faster recovery.
Regarding the BCI, heavy and export-oriented firms, 57% and 56% respectively, have higher business confidence (BCI) compared to the MSMEs (54%-55%) and non-exporter firms (54%) respectively.
Firms inside Dhaka (55%) have higher PBSI (quarter) compared to firms outside Dhaka (54%) while no significant difference has been found between them in the case of BCI.
Despite fuel price hike and the threat of a new wave of Covid-19, the business recovery rate increased to 60.6% in December 2021 which is higher than that of September 2021 (56.8%) and even higher than the earlier record of 57.4% registered in March 2021, according to the survey.
After a dip in the last quarter (July-September 2021), the overall EBI has improved and is now the highest recorded so far in the seven rounds of the survey.
Regarding Omicron, 71% of firms reported export orders or sales may decrease, 79% of firms reported health measures associated costs may increase, and 82% of firms reported the increase in input costs.
Omicron has also increased the risk of a decrease in export as reported by 89% of firms.
The impact of the fuel price hike has also been significant and 97% of firms reported an increase in transportation cost and 79% of firms reported an increase in energy cost.
Similar to the findings from the last quarter, completed paperwork, collateral problem, lengthy procedure, the bank-client relationship will remain as major problems for the firms to avail any loan from the banks.
Addressing the challenges associated with Covid-19, Bangladesh needs to develop a sector-specific protocol, accelerate the vaccination programme, and consider pragmatic stringent policies, the survey recommended.
The survey also emphasized faster disbursement of the stimulus packages, easing access to stimulus packages and government support focusing on specific requirements of firms.
Focusing on SMEs, the study also proposed proper assessment of the impact of the stimulus packages, facilitation of further credit and easy access to finance, supply-side support to reduce the institutional deficiency and promoting the Credit Guarantee Schemes by Bangladesh Bank.
Sanem has been conducting this survey since July 2020 and under the latest (seventh) round of the survey, a total of 502 firms were surveyed from January 3 to 24 of this year.
According to Sanem, the respondent firms represented micro, small, medium and large enterprises from seven sub-sectors of the manufacturing sector including RMG, Textile, Leather and Tannery, Pharmaceutical and Chemicals, Food Processing, Electronics and Light engineering.
The respondents also included eight sub-sectors of the services sector including Retail, Wholesale, Hotels and Restaurants, Financial Sector, ICT, Transport and Real Estate.
The firms were sampled from 38 districts of all 8 divisions of the country and the top management of the firms were surveyed over the telephone for the purpose of the study.
The webinar was attended by economists, academics, researchers, development practitioners, journalists and students.
