Business confidence hit hard amid economic downturn, structural challenges: Report

The country's business confidence has been hit hard amid the economic downturn and structural challenges, according to the LightCastle Business Confidence Index (BCI) report.

LightCastle Partners, a leading business consulting firm, launched the fifth edition of its flagship publication, The LightCastle Business Confidence Index (BCI) 2022-23, at a hotel in the capital on Tuesday afternoon.

The BCI report meticulously evaluates the perspectives of 167 industry leaders representing 25+ sectors, including multinational corporations, local conglomerates, startups, and SMEs, providing a comprehensive snapshot of Bangladesh's dynamic business landscape.

The report delves into the private sector's journey amidst economic headwinds driven by geopolitical challenges, with a specific focus on the impact of the Russia-Ukraine war.

Furthermore, it presents the expectations of thought leaders for the economy, considering industry performance and growth six months into the future.

The report finds that despite facing structural shifts, Bangladesh's private sector has shown a positive outlook in cumulative business sentiment – represented by an overall score of +6.69. Interestingly the local SMEs have fared better (+14.91) than local conglomerates and MNCs (+6.31).

The difference in scores is mainly driven by external factors as the performance of the larger organizations tends to fluctuate more significantly with the changes in the global market.

While the 2023 BCI remains positive, it is relatively lower than the previous year's (+28.69), indicating a subtle deceleration in overall business sentiment. Slower economic growth, rising costs, and reduced consumer demand have contributed to a lower but positive confidence index this fiscal year.

According to the BCI survey (done from March to June this year), the businesses have ranked top five problem areas as: rising cost of raw materials, lack of beneficial policy implementation, difficulty in accessing finance, weak demand, and inefficient human resources.

Nearly 70% of businesses surveyed reported being impacted by the rising costs of raw materials and weak demand, which are primarily attributed to the ongoing Russia-Ukraine conflict. Financial challenges surfaced as a result of financial irregularities, high level of NPL, cash shortages, reduced savings, and currency devaluation. Inefficient human resources and lack of beneficial policies have been consistent issues in previous BCI surveys and are highly demanded to be resolved for better business efficiency.

Industry leaders highlighted higher projections across sales, consumer demand, selling price, and employment; profitability, investments, and exports are expected to remain on the lower side. The rising expenses and difficulties in managing operational cash flow have led companies to abandon their hopes of higher profitability in the next 6 months. They are also forfeiting further investments to maintain necessary cash reserves to withstand any potential volatility.

As part of the launching event, a roundtable discussion was held with the participation of the industry leaders.

M Masrur Reaz, Chairman and CEO of Policy Exchange Bangladesh, moderated the discussion.

M Masrur Reaz said, "What an index can do is help give a structured snapshot and quantify a situation, making it more comprehensible for industry leaders and policy makers. It also helps businesses, foreign investors, in making their decision, who look at documents like Doing Business Index, which was discontinued."

Ivdad Ahmed Khan Mojlish, Managing Director, LightCastle Partners, welcomed the participants, while Zahedul Amin, Director, LightCastle Partners, kicked off the event by presenting the key findings of the report.

Bijon Islam, Chief Executive Officer (CEO) of LightCastle Partners, was also present at the event.

LightCastle Partners is a leading consulting firm in Bangladesh, working closely with private, public, and development sector clients, providing them with the insights they need to make informed decisions for their businesses and development projects.

Over the past six years, LightCastle has been conducting the annual business confidence index study to gauge the confidence level among business leaders, encompassing a multitude of sectors.

The BCI report is publicly available and can be downloaded from www.lightcastlebd.com.