Business Confidence: Pakistan’s Business Sentiment Improves in Q2, but Budget Concerns Remain
Gallup Pakistan survey shows stronger business outlook, although inflation, power shortages and fiscal policy continue to weigh on confidence.
Gallup Pakistan reports an improvement in business confidence during the second quarter of 2026.
Business Confidence in Pakistan improved during the second quarter of 2026, with companies reporting better current conditions and a more optimistic outlook for the year ahead, according to the latest Business Confidence Index released by Gallup Pakistan.
The survey, conducted between 2 and 7 July among 527 businesses across the manufacturing, services, construction, financial services, and wholesale and retail sectors, recorded gains across all three major components of the index.
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The Current Business Conditions score improved by nine percentage points to minus 10%, compared with minus 19% in the first quarter of 2026. Around 45% of businesses described current conditions as good, up four percentage points from the previous quarter.
The Future Business Conditions score recorded the strongest improvement, rising 25 percentage points to positive 12%—its first positive reading in three quarters. More than half of respondents, 56%, said they expect business conditions to improve over the next 12 months.
The Direction of the Country score also improved by 12 percentage points to minus 20%, although it remained in negative territory.
Gallup Pakistan attributed part of the improved sentiment to easing external uncertainty following the resolution of the Iran-US conflict and lower fuel prices before the survey period.
“There is no doubt there is recovery in business confidence in the country; however, indicators remain in the negative despite this recovery,” said Bilal I. Gilani, Executive Director of Gallup Pakistan.
Despite the improvement, businesses continued to report significant operational challenges. Inflation remained the most frequently cited concern, with 34% of respondents identifying it as the top issue they want the government to address.
The survey also found that 72% of businesses experienced electricity load-shedding on the day of the survey, an increase of 15 percentage points compared with the previous quarter and above levels recorded in 2023 and 2024.
Businesses also expressed concerns about the Federal Budget 2026–27. Around 39% of respondents viewed the budget negatively, while 18% gave it a positive assessment.
Nearly half of the businesses surveyed, 49%, said they had low confidence in their prospects over the next year because of the budget, while 36% remained confident.
The survey further showed that 49% of businesses expect the budget to increase the cost of doing business, compared with 22% who anticipate lower costs. Meanwhile, 34% said the budget has made them less likely to invest or expand, while 22% said it has encouraged future investment.
Gallup Pakistan said the budget-related indicators remained firmly negative despite the broader recovery in business sentiment.
“The recovery in sentiment hasn’t extended to the budget,” Gilani said. “Businesses are feeling somewhat better about where things stand and where they are headed, but they do not yet trust that fiscal policy is working in their favour.”
The organisation added that sustained improvements in inflation, energy supply and business operating costs will be essential for the current recovery to develop into a long-term trend.
