Business confidence in Pakistan has slipped into negative territory in the first quarter of 2026, as rising energy costs, inflationary pressures, and regional instability weigh heavily on the private sector, according to the latest survey by Gallup Pakistan.
The quarterly survey shows a broad-based decline in sentiment across key indicators, including current business performance, future expectations, and perceptions of the country’s overall economic direction.
Sharp fall in current business conditions
Only 41 percent of businesses described their current conditions as good, marking a 13 percentage point decline from the previous quarter. The drop reflects growing pressure on firms from higher operational costs and persistent economic uncertainty.
Regional tensions intensify cost pressures
More than 81 percent of businesses reported being negatively affected by regional tensions, primarily through rising fuel and energy costs. Ongoing instability in the Middle East has pushed up global energy prices, directly impacting Pakistani businesses.
Nearly 58 percent of firms said their energy expenses had increased, while 73 percent reported a general rise in overall costs, further squeezing margins.
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Weakening outlook for the months ahead
The outlook for the coming months appears even more fragile. While 44 percent of businesses remain optimistic, a larger 57 percent expect conditions to worsen, pushing the net future confidence score down by 25 percent compared to the final quarter of 2025.
Perceptions of the country’s economic direction also deteriorated sharply. The score fell to negative 32 percent, down from negative 8 percent, indicating growing concern about Pakistan’s broader economic trajectory.
Inflation and energy reliability remain key concerns
Rising costs continue to dominate business concerns. About 62 percent of firms cited inflation and input costs as their biggest challenge, while 37 percent identified inflation as the single most pressing issue.
Fuel and petrol prices are emerging as an increasing burden, with 25 percent of businesses highlighting them as a major pressure point.
Energy reliability remains another serious constraint. Around 57 percent of firms reported experiencing load shedding on the day of the survey—an increase from the previous quarter—adding to operational uncertainty and production risks.
Outlook tied to regional stability
Looking ahead, 76 percent of businesses said conditions could deteriorate further if regional instability continues over the next three months. The survey findings point to rising uncertainty and heightened risk for business activity in the near term.
According to Gallup Pakistan, the decline across all major indicators signals a clear shift toward pessimism, with external cost shocks—particularly energy and fuel prices—playing a central role in shaping business sentiment.
