By Staff Reporter
KARACHI: Business confidence in Pakistan strengthened in the second quarter, with companies reporting less-negative views of current conditions and a sharply more optimistic outlook for the year ahead, according to a survey by Gallup Pakistan released on Thursday.
The polling firm’s Business Confidence Index improved across all three of its main components in the survey, conducted from July 2 to 7 among 527 businesses spanning manufacturing, services, construction, financial services, and wholesale and retail trade. The current business conditions score rose nine percentage points from the first quarter to negative 10%, while the gauge of expected conditions over the next 12 months jumped 25 points to positive 12% — the first positive reading in three quarters.
Gallup attributed part of the improvement to easing external pressure and a decline in fuel prices ahead of the survey period. That easing followed a memorandum of understanding between the US and Iran reached in mid-June, which had briefly pushed oil prices back toward levels seen before the war began in late February. The relief proved short-lived: fighting between the US and Iran resumed within days of the survey closing, with both sides striking each other’s infrastructure and Iran-aligned Houthi forces attacking tankers in the Red Sea. Brent crude, which had fallen close to pre-war levels in June, has since climbed to a six-week high near $88 a barrel, driven by the renewed conflict.
“There is no doubt there is a recovery in business confidence in the country,” said Bilal I. Gilani, Gallup Pakistan’s executive director. “However, indicators remain in the negative despite this recovery.”
Almost half of respondents, or 45%, described current business conditions as good, up four percentage points from the first quarter. Looking ahead, 56% said they expected conditions to improve over the next year. A separate measure tracking sentiment on the country’s overall economic direction rose 12 points to negative 20%, though it stayed firmly in negative territory.
Power Cuts Worsen
The improvement in headline sentiment masked continued strain on day-to-day operations. Inflation remained the most cited concern, with 34% of businesses naming it as the top issue they wanted the government to address.
Electricity supply also deteriorated. Some 72% of businesses reported power outages on the day they were surveyed, up 15 percentage points from the prior quarter and higher than comparable readings in 2023 and 2024 — a sign that a longstanding drag on Pakistani industry worsened even as broader sentiment recovered.
Budget Skepticism Lingers
Companies remained largely critical of the government’s fiscal plans. Views on the Federal Budget for 2026-27 skewed negative across every measure Gallup tracked, even as overall confidence improved.
Some 39% of businesses rated the budget negatively, against 18% who viewed it favorably. Nearly half, or 49%, said they had low confidence in their prospects over the next 12 months because of the budget, versus 36% who expressed confidence. A similar share, 49%, said they expected the budget to raise the cost of doing business, against 22% who anticipated a decline.
On investment, 34% of respondents said the budget made them less likely to invest or expand, compared with 22% who said it made them more likely to do so.
Gallup said the gap between improving broader sentiment and persistently negative budget views was among the more notable findings, since all four budget-related measures stayed net negative even as the overall index recovered.
“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 favor.”
The renewed fighting since the survey closed raises the question of whether the improvement in sentiment will hold into the third quarter. Pakistan, like much of South Asia, is exposed to swings in global energy prices through its fuel import bill, and an extended period of elevated oil costs would add to the inflationary pressure businesses already cited as their top concern.
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