KARACHI: Business sentiment in Pakistan weakened sharply in the first quarter of 2026, with firms turning more pessimistic as rising energy costs and regional geopolitical tensions weighed on activity, a Gallup Pakistan survey showed.
The 17th quarterly Business Confidence Survey, conducted in April and based on responses from 510 companies, pointed to a broad-based deterioration in current conditions, expectations and views on the country’s economic direction.
About 41 per cent of businesses described their operations as “good” or “very good”, down 13 percentage points from the previous quarter. The net share of firms reporting positive conditions fell by 27 per cent, signalling a shift towards more negative sentiment after earlier improvement.
Expectations for the coming months were weaker still. While 44 per cent of respondents said they were optimistic, 57 per cent expected conditions to worsen. The net future confidence score declined by 25 per cent from the final quarter of 2025.
Perceptions of the country’s overall direction also deteriorated, with the balance dropping to -32 per cent from -8.0 per cent previously, indicating sentiment has moved firmly into negative territory.
Persistent structural pressures continued to weigh on businesses. Inflation remained the most cited concern, flagged by 37 per cent of respondents, while worries about fuel and petrol prices rose to 25 per cent. Energy reliability was another major issue, with 57 per cent of firms reporting loadshedding on the day of the survey, up 15 percentage points from the previous quarter.
Rising costs emerged as the dominant operational risk, with 62 per cent of firms identifying inflation and input prices as their main challenge. Confidence in economic management also weakened, with 46 per cent of respondents saying governance had deteriorated, compared with 33 per cent who reported an improvement.
Regional developments, particularly tensions in the Middle East, were a significant factor. About 81 per cent of businesses reported negative effects linked to these developments, mainly through higher fuel and energy costs. Nearly 58 per cent said energy expenses had increased, while 73 per cent reported an overall rise in costs compared with the previous quarter.
Looking ahead, 76 per cent of firms expect conditions to worsen further if regional instability persists over the next three months.“Simultaneous declines across all major indicators point to a clear shift towards pessimism within the business community, with external cost pressures playing a central role,” said Bilal I Gilani, executive director at Gallup Pakistan.
