Spiked fuel prices will hamper business recovery: Sanem

The hiked rates of diesel will thwart the ongoing business recovery from the pandemic, says the South Asian Network on Economic Modeling (Sanem).

"All businesses have been recovering from the Covid fallout. Nearly all industries posted growth compared to the corresponding period last year. But a combination of spiking inflation, downward remittance flow and pricier fuel will deter the growth," Sanem Executive Director Dr Selim Raihan told a programme Wednesday while revealing the findings of a survey.

The sixth phase of the survey on business confidence about Covid recovery shows 21% of industries were on a strong recovery lane until 30 September this year. As many as 52% of businesses were found to be in a moderate recovery stage while 27% posted weak turnaround.

The figures outnumbered the scores found in the fifth phase of the survey three months earlier which found recovery of only 9% of businesses strong until June while 64% of entities were still at the bottom of the recovery path.

Referring to the recent diesel price hike by Tk15 per litre, Dr Selim Raihan, also an economics professor at Dhaka University, said, "With the already spiralling commodity prices, mounting production and transportation costs will put both the industries and consumers in trouble. People will certainly scrimp their spending."

Sanem conducted the latest phase of the survey in October by interviewing entrepreneurs or representatives of 500 industries and service entities in 37 districts across the country.

The survey covered manufacturing sector ventures such as garments, textiles, leather and leather products, pharmaceuticals, light engineering and food processing industries. The survey also included wholesale and retail business, restaurants, transport, ICT and telecommunications, financial sector and real estate sector.

According to the survey, these companies have made comparative improvement in the current annual personal financial condition index and quarterly present business status index. The April-June quarter of 2020 was the worst in terms of profit, investment, business costs, sales or exports. In contrast, July-September was the best.

In the present business status index, the manufacturing sector and the service sector have a relatively good position in each sub-sector. But the quarterly index shows that the leather industry and real estate are lagging behind. At the same time, export is better than the domestic sector. Dhaka-based institutions are also in a relatively good position.

Selim Raihan said it is positive that the business confidence index of participants of the sixth phase of the survey showed improvement. Business confidence index rose above 60 in July-September this year from 49 in October-December last year, which is the highest in the post-Covid period.

Referring to survey findings on stimulus packages, Selim Raihan said 25% of the businesses that had not received the stimulus earlier have recently tried to avail the low-cost loans. However, only 2% of the companies received the loans from the stimulus package. Entrepreneurs have raised concerns about bribery in getting loans from the package.

The government announced a stimulus of Tk72,750 crore in several phases in the form of low-cost loans to counteract the pandemic fallout.

Of it, Tk30,000 crore is for industrial loans, Tk20,000 crore for small and medium enterprises, and Tk5,000 crore for salary payments of workers at export-oriented industries.

Selim Raihan fears the fuel hike will add to the pressure on the low-income people, and commented that the government could have subsided for oil as a Covid stimulus.