Islamabad: Business confidence in Pakistan improved during the second quarter of 2026, as companies reported better current conditions and stronger expectations for the future, according to the latest Business Confidence Index released by Gallup Pakistan.
According to Gallup Pakistan, the survey was conducted from July 2 to 7 among 527 businesses across various sectors, including manufacturing, services, construction, financial services, and wholesale and retail trade. The results showed improvement across all three major components of the index. The Current Business Conditions score rose by nine percentage points to negative 10%, compared to negative 19% in the first quarter of 2026. Approximately 45% of businesses described current conditions as positive, an increase of four percentage points from the previous quarter.
The Future Business Conditions score experienced the strongest improvement, rising by 25 percentage points to positive 12%, marking the first positive score in three quarters. Fifty-six percent of respondents expected business conditions to improve over the next 12 months. The Direction of the Country score also improved by 12 percentage points to negative 20%, although it remained in negative territory.
Gallup Pakistan noted that part of the improvement in sentiment appeared linked to reduced external uncertainty following the resolution of the Iran-US conflict and a consequent decline in 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 improved sentiment, businesses faced significant operational pressures. Inflation was the most frequently cited issue, identified by 34% of respondents as the key problem for the government to address. Loadshedding also worsened, with 72% of businesses reporting power outages on the day of the survey, up 15 percentage points from the previous quarter.
Views regarding the Federal Budget 2026-27 were largely negative. Thirty-nine percent of respondents rated the budget negatively, compared with 18% who viewed it positively. Nearly half of the surveyed businesses, or 49%, expressed low confidence in their prospects over the next 12 months due to the budget, while 36% conveyed confidence. Similarly, 49% expected the budget to increase the cost of doing business, compared to 22% who anticipated a reduction.
On investment intentions, 34% said the budget made them less likely to invest or expand, while only 22% said they were more likely to do so. Gallup Pakistan emphasized the significance of these budget-related findings, as all four measures remained net negative despite the broader recovery in business confidence. "The recovery in sentiment hasn't extended to the budget," Gilani noted. "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 favor."
Gallup Pakistan stated that a sustained improvement in inflation, energy supply, and operating costs would be necessary for the latest recovery to be regarded as a durable turning point. The Gallup Pakistan Business Confidence Index has tracked business sentiment since the second quarter of 2020. The latest survey included businesses across 40 districts and cities in all four provinces, Azad Jammu and Kashmir, and Malakand.