Business confidence turns negative in Pakistan as energy costs, tensions rise: Gallup

Pakistan’s business sentiment deteriorated sharply in the first quarter of 2026, with a majority of firms reporting worsening conditions amid rising energy costs and spillover effects from regional tensions, according to a Gallup Pakistan survey released Thursday.

The 17th quarterly Gallup Business Confidence Survey, conducted in April based on responses from 510 businesses nationwide, showed declines across all key indicators, including current performance, future expectations and perceptions of the country’s direction.

Only 41% of businesses described their current operations as “good” or “very good,” down 13 percentage points from the previous quarter. The net proportion of firms reporting positive conditions fell 27%, signaling a shift toward pessimism after earlier gains.

Outlook weakens

The outlook for the coming months appears even more fragile.

While 44% of respondents expressed optimism about future performance, 57% expect conditions to worsen. The net future confidence score declined by 25% compared with the fourth quarter of 2025.

Perceptions of the country’s overall direction also deteriorated, with the score falling to -32% from -8% in the previous quarter.

“The simultaneous decline across all major indicators signals a clear shift toward pessimism within the business community,” said Bilal I. Gilani, executive director at Gallup Pakistan, adding that external cost pressures are playing a central role in shaping sentiment.

Rising costs and energy pressures

Inflation remained the top concern, cited by 37% of businesses, while concerns over fuel and petrol prices rose to 25%, highlighting intensifying cost pressures.

Energy reliability also emerged as a major issue, with 57% of firms reporting load-shedding on the day of the survey, up 15 percentage points from the previous quarter.

Rising costs were identified as the dominant operational risk, with 62% of businesses pointing to inflation and input costs as their biggest challenge.

The survey also showed declining confidence in economic management, with 46% of respondents saying governance has worsened, compared with 33% who reported improvement.

Impact of regional tensions

Regional developments, particularly tensions in the Middle East, have had a significant impact on business sentiment.

About 81% of firms reported negative effects linked to these developments, mainly through rising fuel and energy costs. Nearly 58% said their energy expenses had increased, while 73% reported overall cost escalation compared with the previous quarter.

Looking ahead, 76% of businesses expect conditions to deteriorate further if regional instability persists over the next three months.

The report said Pakistan’s business environment is entering a period of heightened uncertainty, driven by domestic economic pressures and external shocks, with risks of near-term stagnation despite some resilience in certain sectors.