ISLAMABAD: The business confidence level in Pakistan shows positive improvement in Q2 2026 with better assessments about their present position and expectations about the future year. This is according to the latest results of Business Confidence Index, which was published by Gallup Pakistan.

Survey Coverage and Approach

This survey that led to the conclusion that business confidence in Pakistan had improved was done between July 2 and 7 among 527 firms within the manufacturing, service, construction, financial services, and wholesale and retail trade industries. The result revealed improvement in all the three main components covered by the index.

Present Conditions Demonstrate Significant Improvement

The Current Business Conditions index has increased by nine percentage points to stand at -10%, in contrast to the -19% recorded in Q1, 2026. About 45% of the companies consider the present business conditions as favorable, registering an increase of four percentage points from last quarter.

Despite the positive trend in terms of business confidence of the firms in Pakistan, the index is still in negative territory, which implies that more companies have a negative perception about the present business conditions.

For the First Time in Three Quarters, Expectations for the Future Become Positive

The Future Business Conditions indicator has seen the most robust improvement of business confidence in Pakistan as this indicator increased by 25 percentage points and became positive 12%. In addition, it is worth noting that for the first time in three quarters in a row, this indicator showed a positive result, which is the largest change in all the survey indicators.

Fifty-six percent of the respondents said they were expecting to see an improvement of business conditions in the next 12 months.

Direction of the Country Increases but Still Negative

The Direction of the Country index also increased by 12 percentage points to negative 20%, although it was still negative despite the improvement. The Direction of the Country is a broader measure than just business sentiment and takes into consideration other factors.

Why Is the Recovery Taking Place?

The improved situation was partly attributed by Gallup Pakistan to reduced uncertainty on account of the settlement of the Iran-US dispute, followed by reduced fuel prices prior to the period of the survey. Geopolitical stability seems to have played an important role in improving business sentiment during this quarter.

According to Bilal I. Gilani, Executive Director, Gallup Pakistan, "There is no doubt that there is a recovery in business confidence in the country; however, the indicators are still negative despite this recovery."

Operational Pressures Persist

Even as business optimism in Pakistan improved, firms were still encountering a number of operational difficulties. The biggest of these was inflation, with 34% of businesses citing this as the primary concern that they wanted the government to deal with.

There was also a considerable deterioration in the situation regarding loadshedding during this time. Some 72% of firms were affected by loadshedding on the day of the survey, which represents a rise of 15 percentage points over the previous quarter, and above levels seen in both 2023 and 2024.

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Although the economic recovery is ongoing, the outlook for the Federal Budget 2026-27 was still quite negative. Only 18% of respondents gave a positive opinion about the budget, while 39% gave it a negative one.

As many as 49% of the survey participants had low confidence in their business future in the coming year considering the budget, while 36% felt confident. At the same time, 49% expected the budget to raise the costs of doing business, while 22% expected them to fall.

Gilani was quick to point out the discrepancy. "While the sentiment recovery has not reached the budget yet, businesses feel relatively positive about how things currently look and where they will head, but they have yet to see that fiscal policy is doing them any favors.

Gallup Pakistan warned that it would be essential for inflation, energy supply, and cost of production to improve significantly to be able to regard the latest recovery as a turning point in a durable sense.

The Gallup Pakistan Business Confidence Index has been measuring business confidence since the second quarter of 2020, giving a longitudinal perspective on how the business organizations in Pakistan feel about their economic situation. The most recent survey was conducted among businesses from 40 districts and cities in all four provinces of Pakistan, Azad Jammu and Kashmir, and Malakand.