Despite challenges, business confidence rises

Q2 survey indicates moderate easing of political, economic uncertainty

LAHORE:

The confidence of Pakistan's private businesses has surged to its highest level in nearly four years, according to the latest survey of Gallup Pakistan. Also, an increasing number of businessmen have started thinking that the government is managing the economy in a better way than the previous administration.

The improvement comes despite inflation, high utility costs and electricity load-shedding, which continue to hinder business operations. The Business Confidence Survey for the second quarter of 2025 was conducted between July 23 and 27, capturing the views of 524 businesses across manufacturing, services and trade sectors. The standout finding is a significant rebound in perception of the country's overall direction.

The "Direction of the Country Score" now stands at -2%, a sharp improvement from the far more pessimistic readings of late 2024.

While the score remains marginally negative, it marks the highest level of confidence in national direction since Q4 2021. "This uptick suggests a moderate easing of political and economic uncertainty from the perspective of the business community," the survey said.

The number of businesses holding a good perception about the government's ability to manage the economy has improved over the past year. According to the survey, 46% of businessmen called the government's management of the economy better than its predecessor, compared to 24% a year ago.

Commenting on the survey, Gallup Pakistan Executive Director Bilal Ijaz Gilani said the latest edition was pointing to a "cautiously improving mood" among Pakistani businesses. "While the shift is incremental, it reflects a growing sense of stabilisation among economic actors," he said. The most visible change, Gilani said, was improvement in perception of the direction of the country and also the positive trend in trust in the government's handling of the economy.

"As always, sustained momentum will depend on continued macroeconomic reforms, policy consistency and greater institutional responsiveness, especially towards businesses operating outside the formal sector," said the official.

Business performance was another area that showed encouraging signs as 61% of respondents described their current operations as "good" or "very good," up six percentage points from the previous wave. While services and trade enterprises reported the largest gains, the respondents from the manufacturing sector underscored comparatively slower signs of recovery.

The survey found 61% of businesses optimistic about the coming months, with the Future Business Confidence score improving by just one percentage point.

"This indicates that while businesses are not anticipating worsening conditions, there is also limited momentum for stronger optimism at this stage," the survey said. Asked about challenges, the businessmen cited price hike, high energy costs and taxes as their biggest concerns, which shows the structural challenges remain deeply entrenched in Pakistan's business sector.

The Consumer Price Inflation, which eased to a record 0.3% in April from 38% in May 2023, emerged as the most pressing issue, cited by 28% of respondents as the top priority for government action. High utility costs, 18%, while concerns over taxation, 11%, exhibited a slight decrease from last year's levels.

Energy insecurity also continued to affect operations as nearly half, 47%, of those surveyed said they were experiencing load-shedding on the day of the interview.

"While still a concern, this figure is lower than during the same quarter in prior years, indicating some potential seasonal or regional relief," said the survey.

Overall, the survey indicates a measured improvement in private sector sentiment, especially regarding businessmen's perceptions of national direction and current business operations.