Business confidence in Pakistan improved during the second quarter of 2026 as firms reported better current conditions and a more optimistic outlook for the year ahead.
The Gallup survey, conducted between July 2 and 7, covered 527 businesses across the manufacturing, services, construction, financial services, and wholesale and retail sectors. It recorded gains across all three key components of the index.
The Current Business Conditions score improved by nine percentage points to minus 10%, compared with minus 19% in the previous quarter. Around 45% of respondents described current business conditions as good, marking a four-point increase from the first quarter.
The biggest improvement came in the Future Business Conditions indicator, which climbed 25 percentage points to positive 12%, returning to positive territory for the first time in three quarters. More than half of the businesses surveyed (56%) said they expect 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 below zero.
Gallup Pakistan attributed part of the improved business sentiment to reduced external uncertainty following the easing of Iran-US tensions and lower fuel prices ahead of 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 improved outlook, businesses continued to highlight major operational challenges. Inflation remained the most pressing concern, with 34% of respondents identifying it as the top issue they wanted the government to address.
Power shortages also intensified. Around 72% of businesses reported experiencing electricity outages on the day of the survey, an increase of 15 percentage points from the previous quarter and higher than levels recorded in 2023 and 2024.
The survey also found that businesses remained largely dissatisfied with the Federal Budget 2026-27. Nearly 39% of respondents viewed the budget negatively, while only 18% expressed a positive opinion.
Almost half of the businesses surveyed (49%) said they had little confidence in their prospects over the next year under the current budget, compared with 36% who remained optimistic.
Similarly, 49% expected the budget to increase the cost of doing business, while only 22% believed it would reduce costs. In terms of investment plans, 34% said the budget had made them less likely to invest or expand operations, whereas 22% reported greater willingness to invest.
Gallup Pakistan noted that, despite the broader recovery in business sentiment, all budget-related indicators remained in negative territory.
“The recovery in sentiment hasn’t extended to the budget,” Gilani said. “Businesses are feeling somewhat better about current conditions and future prospects, but they are still not convinced that fiscal policy is working in their favour.”
The report concluded that lasting improvements in inflation, energy availability, and business operating costs would be essential for the current recovery in confidence to become sustainable.
Gallup Pakistan has been tracking business sentiment through its Business Confidence Index since the second quarter of 2020. The latest survey included businesses from 40 districts and cities across all four provinces, Azad Jammu and Kashmir, and Malakand.
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