South Asian Network on Economic Modeling (SANEM) initiated a quarterly firm-level survey namely Business Confidence Index (BCI) survey since July 2020 to understand the state of the manufacturing and service sectors in Bangladesh during the COVID-19 pandemic. The first round of the survey (conducted on July’20) revealed the dire state of business in the country. The second (conducted on October’20), third round (conducted on January’21) and fourth-round (conducted on April’21) showed signs of economic recovery. The fifth round (conducted on July’21) exposed a deterioration of business confidence followed by the second wave of COVID-19, but the sixth fifth round (conducted on October’21) revealed an improvement of business confidence through a nationwide mass vaccination programme.

The results of the sixth phase of the BCI survey has been released on November 10 at 11 AM in a webinar conducted by Zoom. The webinar was also broadcast live on SANEM’s Facebook page.

In the sixth phase of the Business Confidence Index (BCI) survey, a total of 500 firms have been surveyed over the phone. The survey was completed between October 10 to 27 this year. Out of 500 firms, 255 firms were from the manufacturing sector and 245 firms were from the services sector. The survey covered 37 districts of the 8 divisions of Bangladesh. 7 sub-sectors from manufacturing sectors such as RMG, Textile, Leather and Tannery, Pharmaceutical and Chemicals, Food Processing, Electronics and Light engineering, and other and 8 sub-sectors from the services sector such as Retail, Wholesale, Hotels and Restaurants, Financial Sector, ICT, Transport, Real Estate and Other services were included in the survey. The executives of the surveyed firms were asked about business costs, sales, profits, investment situation, employment, salaries, loan receipts, future business prospects. At the same time, they were asked regarding the vaccination programme, incentive packages, business environment, financing and economic recovery processes.

Based on the survey responses, SANEM has constructed three indices: i) Yearly Present Business Status Index (PBSI: Year), which has been used to understand the business performance in July-September 2021 over the same quarter of last year, ii) Quarterly Present Business Status Index (PBSI: Quarter), which measures the business performance in July-September 2021 compared to the immediate previous quarter (April-June 2021), and iii) Business Confidence Index (BCI), which shows the expectations of businesses in next quarter (October-December 2021) over the present quarter (July-September 2021). Interpretation of the indices: a score of 50 indicates no change in the status/confidence, a score of less than 50 indicates deterioration while that above 50 indicates an improvement in business status/confidence.

In the sixth round, the score for both PBSI (Quarter) and PBSI (Year) increased by nearly 10 points from the fifth round, and reached 52.3 & 56.8, respectively. However, the BCI index in this round reached 60.7 from 49.7 in the fifth round, which provided that business communities are more ambitious about the upcoming quarter (Oct-Dec’2021). Here, it should be mentioned that business communities’ expectations regarding the next quarter did not take into account the rise of fuel price as the survey was conducted before that. A similar pattern of improvement was observed in the case of all the six sub-indices i.e. Profitability, Investment, Employment, Wage, Business cost and Sales/Export across the three broad indices.

Compared to July-September 2020, the present business status in July-September 2021 across all sectors experienced an improvement. However, the financial sector, restaurant, ICT, Pharma, and RMG sector experienced faster improvement while leather, light engineering, and food manufacture sector experienced low improvement. Moreover, compared to the last quarter (April-June’21), the present business status index (PBSI: Quarter) across the sectors follows similar kinds of patterns, but the improvement is lower compared to PBSI (Year). This provided that, for all the sectors the last quarter was worsened. On the flip-side, in the case of BCI, Restaurant, Textile, Pharmaceuticals, RMG, and ICT sectors are quietly more ambitious while the food manufacturing, wholesale, and retail sectors are relatively less ambitious.

The value of indices by firm size revealed that the present business index compared to both the same quarter of the last year and the last quarter is better than that of the medium and small firms. Nonetheless, the micro, small and medium firms also experienced significant improvement over the quarters. This is also true in the case of BCI. Moreover, it also observed that, like other rounds, the indices score is higher for the exporting firm as opposed to non-exporting firms, and Dhaka-based firms compared to firms situated outside Dhaka.

In the sixth round of the survey (Jul-Sep 2021), 21% of respondents think that Bangladesh is on a path of strong recovery, while it was only 9% in the earlier round. Similarly, the business community’s view on moderate recovery increased to 52% in this round from 27% in the previous round. In this round as low as 27% of respondents think that the economy is on the path of week recovery, while the percentage in the previous round was as high as 64%.

All the respondents were asked to what extent firms were able to recover their business since March 2020. For the responses, it is found that on average the firms were able to recover 56.8%, the percentage in the last survey was 34.9%. Faster recovery was observed in Restaurant, RMG, Textile, and Light Engineering sectors amongst others.

Major difficulties firms faced during the recovery phase includes lockdown and stringent measures (73%), consecutive waves of Covid 19 (56%), the decline in sales and export (48%), increase in input price (37%), supply chain disruption (33%),  and decline in product demand (31%).

In the case of availing stimulus packages, 25% of firms attempted to avail the stimulus in the sixth round who did not get any package in the earlier round (fifth round). Out of 25%, only 2% availed of it. Problems faced in availing or pursuing the stimulus package during the sixth round were lengthy procedures, bank-related services, understanding procedures, insufficient amounts, bribes, etc.

To observe the business environment, SANEM constructs another index namely Enabling Business Environment Index (EBI). The study shows that the score of EBI decreased to 52.8 in the sixth round from 53.5 in the fifth round. While the situation of the overall business environment declined slightly, COVID management and transport quality, two indicators of EBI improved.

To cope up with the COVID-induced shock 46.2% of firms has availed of loan. Amongst them, 77.5% availed from the formal sector (like banks) and 22.5% availed from informal sectors (like friends and relatives, co-operate society etc.). However, they face several problems in availing of any loan from the bank or non-bank financial institution like complicated paperwork, collateral problem, lengthy procedures, bank client relationship, corruption and difficulty in understanding the procedure, etc.

The coverage of vaccination for both employer and employee increased in July-September 2021 quarter compared to April-June 2021 quarter. The survey shows that 87% of the respondent (employers) got at least one dose of the vaccine while the rate was 60% in the earlier round. In the case of employees’ vaccination, this figure was 55.07% in July-September 2021 quarter compared to 25.53% in the previous quarter.

Moreover, SANEM identified five more emerging challenges that can affect economic recovery. These challenges are fuel price hikes, inflationary pressure, falling remittances, the new COVID-19 wave, and the need for wider coverage of vaccination.

Download the presentation of the webinar.