Business sentiment turns negative as energy shocks, regional tensions weigh on firms: Gallup Survey

Pakistan’s private sector confidence has 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 2026 based on responses from 510 businesses across the country, shows a broad-based decline across all key indicators current performance, future expectations and perception of national direction.

Only 41% of businesses described their current operations as good or very good, reflecting a 13 percentage point drop from the previous quarter. The net proportion of firms reporting positive conditions has fallen by 27%, indicating a clear shift toward pessimism after earlier gains.

The outlook for the coming months appears even weaker. While 44% of respondents expressed optimism about future performance, a larger 57% expect conditions to worsen. The net future confidence score has declined by 25% compared to Q4 2025, pointing to growing uncertainty and weakening business momentum.

Perceptions regarding the country’s overall direction also deteriorated significantly, with the score dropping to -32% from -8% in the previous quarter. The Gallup survey report notes 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 37% of businesses, while concerns over fuel and petrol prices surged to 25%, highlighting intensifying cost pressures. Energy reliability remains another major issue, with 57% 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 62% of businesses identifying inflation and input costs as their biggest challenge. The Gallup survey also shows declining confidence in economic management, as 46% of respondents believe governance has worsened, compared to 33% who see improvement.

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

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

Looking ahead, 76% 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 facing 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.

Commenting on the findings, Bilal I. Gilani, Executive Director at Gallup Pakistan, said the simultaneous decline across all major indicators signals a clear shift toward pessimism within the business community, with external cost pressures playing a central role in shaping sentiment.