Pakistan business confidence improves in Q2, but inflation remains top concern:: survey

Business confidence in Pakistan improved during the second quarter of 2026 as companies reported better operating conditions and stronger expectations for the year ahead, according to Gallup Pakistan’s latest Business Confidence Index.

The current business conditions score rose by nine percentage points to negative 10%, from negative 19% in the first quarter. Around 45% of respondents described present conditions as good, up four percentage points from the previous survey.

The sharpest improvement came in expectations for the next 12 months. The future business conditions score increased by 25 percentage points to positive 12%, entering positive territory for the first time in three quarters.

Around 56% of businesses expected conditions to improve over the coming year.

The score measuring perceptions about the country’s direction improved by 12 percentage points but remained negative at minus 20%.

The survey, conducted from July 2 to 7 among 527 businesses, covered manufacturing, services, construction, financial services, and wholesale and retail trade. All three main components of the index improved during the second quarter.

Gallup Pakistan said the recovery in sentiment may partly reflect reduced external uncertainty after the resolution of the Iran-US conflict and a decline in fuel prices before the survey.

Despite the improvement, companies continued to report significant operational pressures. Inflation remained the most frequently cited concern, with 34% of respondents identifying it as the main problem they wanted the government to address.

Power outages also worsened. Around 72% of businesses reported loadshedding on the day of the survey, up 15 percentage points from the previous quarter and above levels recorded in 2023 and 2024.

Views on the Federal Budget 2026-27 remained largely unfavourable. Around 39% of respondents rated the budget negatively, compared with 18% who viewed it positively.

Nearly half of the businesses surveyed, or 49%, expressed low confidence in their prospects over the next 12 months in light of the budget, while 36% remained confident.

Similarly, 49% expected the budget to raise the cost of doing business, compared with 22% who anticipated a reduction.

The budget also weakened investment intentions, with 34% of businesses saying they were less likely to invest or expand, while 22% said they were more likely to do so.

Gallup Pakistan said all four budget-related indicators remained net negative despite the broader recovery in confidence.