LAHORE: Pakistan’s private sector confidence deteriorated sharply in the first quarter of 2026, with a majority of businesses reporting worsening conditions amid rising energy costs and spillover effects from regional geopolitical tensions, according to a survey released by Gallup Pakistan.

The 17th quarterly Gallup Business Confidence Survey, conducted in April based on responses from 510 businesses nationwide, shows a broad-based decline across all key indicators — current performance, future expectations and perception of national direction.

Only 41 per cent of businesses described their current operations as “good” or “very good”, marking a 13-percentage-point drop from the previous quarter. The net proportion of firms reporting positive conditions fell by 27pps, signalling a clear shift towards pessimism after earlier gains.

The outlook for the coming months appears even weaker. While 44pc of respondents expressed optimism about future performance, a larger 57pc expect conditions to worsen. The net future confidence score declined by 25pps compared to the fourth quarter of 2025, pointing to growing uncertainty and weakening business momentum.

Gallup survey shows worsening outlook, mounting energy pressures

Perceptions regarding the country’s overall direction also deteriorated significantly, with the score dropping to -32pc from -8pc in the previous quarter.

The report noted that sentiment has firmly entered negative territory, reflecting heightened concern among businesses about the broader economic trajectory.

Structural challenges continue to weigh heavily on the private sector. Inflation remains the top concern, cited by 37pc of businesses, while concerns over fuel and petrol prices rose to 25pc, highlighting intensifying cost pressures.

Energy reliability remains another major issue, with 57pc of firms reporting load-shedding on the day of the survey — a 15 percentage point increase from the previous quarter.

Rising costs have emerged as the dominant operational risk, with 62pc of businesses identifying inflation and input costs as their biggest challenge. The survey also shows declining confidence in economic management, as 46pc of respondents believe governance has worsened, compared to 33pc who see improvement.

A key feature of the latest survey is the pronounced impact of regional developments, particularly tensions in the Middle East. Around 81pc of businesses reported negative effects linked to these developments, primarily through rising fuel and energy costs.

Nearly 58pc of firms said their energy expenses had increased, while 73pc reported overall cost escalation compared to the previous quarter.

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

The report concludes that Pakistan’s business environment is entering a period of heightened uncertainty, driven by a combination of domestic economic pressures and external shocks. While some sectors continue to show resilience, the overall trajectory suggests stagnation risks in the near term.

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

Published in Dawn, April 24th, 2026