Business confidence in Pakistan weakened significantly during the second quarter of 2026, with a majority of companies delaying or revising investment decisions amid rising economic uncertainty, according to the latest Business Confidence Index (BCI) survey released by the Overseas Investors Chamber of Commerce and Industry.
The nationwide survey, conducted in Q2 2026, shows that between 70 and 80 percent of businesses have either postponed or reassessed their investment plans. The trend reflects growing concerns over inflation, geopolitical instability, and rising operational costs.
Overall business confidence declined by 9 percentage points, falling to a net positive 13 percent compared to 22 percent in the previous survey cycle.
Geopolitical Pressure and Economic Uncertainty Drive Sentiment Down
According to OICCI, the downturn in sentiment is largely linked to external shocks, particularly the ongoing conflict in the Middle East. The report notes that disruptions in global supply chains, rising fuel costs, and increased inflationary pressure have collectively weighed on corporate expectations.
The survey highlights that businesses are increasingly prioritising risk management and operational resilience over expansion, reflecting a defensive shift in corporate strategy across multiple sectors.
Sector-Wise Breakdown Shows Broad-Based Weakness
The Services sector recorded the steepest decline in confidence, dropping 20 points to 14 percent. Manufacturing sentiment also weakened, reflecting concerns over input costs, demand volatility, and import-related pressures.
Retail was the only sector to show improvement, rising by 3 points to 20 percent. Analysts suggest this may reflect short-term consumer demand stability despite broader macroeconomic challenges.
Investment Activity Drops to Critical Low
One of the most concerning findings in the survey is the sharp decline in the New Investment Index, which fell by 10 points to just 2 percent. This indicates that capital expenditure plans across industries have largely stalled.
Businesses reported widespread caution in committing to new projects, with many opting to conserve liquidity and delay expansion decisions until macroeconomic conditions stabilize.
Inflation, Taxation and Policy Uncertainty Remain Key Risks
The survey identifies inflation as the top long-term threat to business growth, cited by 84 percent of respondents. High taxation follows closely at 79 percent, while 61 percent of respondents highlighted currency instability and inconsistent government policy as major constraints.
Looking ahead, 34 percent of surveyed firms expect business conditions to worsen over the next six months, up from 22 percent in the previous survey. This shift signals rising pessimism about near-term economic recovery.
Regional Divide in Business Sentiment
The survey also reveals a geographical split in confidence levels. Business sentiment in major metropolitan centres fell by 12 points to 11 percent, reflecting concentrated economic pressure in urban industrial hubs.
In contrast, non-metropolitan cities including Peshawar, Quetta, Rawalpindi, Multan, Sialkot, and Sukkur recorded a modest improvement of 3 points, reaching 22 percent. This suggests relatively stronger resilience in smaller and mid-tier markets.
Foreign Investor Sentiment Remains Relatively Stable
Despite the broader decline in confidence, OICCI member companies, which represent a large share of foreign investors in Pakistan, showed comparatively stronger resilience. Their confidence index edged up to 28 percent, indicating continued long-term interest in the market despite short-term volatility.
This divergence suggests that multinational firms may be better positioned to absorb macroeconomic shocks due to diversified supply chains and stronger capital buffers.
AI Adoption Emerges as a Strategic Priority
An emerging theme in the survey is increased corporate interest in generative artificial intelligence. Many firms reported growing preparedness for AI integration across operations, workforce planning, and digital systems.
This shift indicates that despite current economic pressures, businesses are continuing to invest in long-term productivity and technology transformation strategies.
Outlook
The OICCI Business Confidence Index remains a key indicator of corporate sentiment in Pakistan, covering firms that collectively account for approximately 80 percent of the country’s GDP.
While current results point to weakening short-term sentiment, the survey also highlights underlying structural interest in long-term investment, particularly among foreign and large-scale corporate players.
