Business confidence in Pakistan turned negative in the first quarter of 2026 as rising energy costs, inflation and regional tensions weighed on the private sector, according to a new Gallup Pakistan survey.

The quarterly survey showed a broad deterioration in business sentiment across current conditions, future expectations and views on the country’s economic direction.

Only 41% of businesses described their current conditions as good, down 13 percentage points from the previous quarter. The outlook for the months ahead was also weak, with 44% of firms expressing optimism while 57% expected conditions to worsen. That pushed the net future confidence score down 25% from the final quarter of 2025.

Perceptions about the country’s overall direction also worsened sharply. The score fell to negative 32% from negative 8%, reflecting growing concern over the broader economic environment.

Rising costs remained the biggest challenge for businesses. Around 62% of firms identified inflation and input costs as their main concern, while 37% said inflation itself was the top issue. Concerns over fuel and petrol prices also intensified, with 25% of respondents highlighting them as a major source of pressure.

Energy reliability continued to weigh on operations, with 57% of businesses reporting loadshedding on the day of the survey, a notable increase from the previous quarter.

Regional tensions, particularly in the Middle East, also had a significant impact on sentiment. About 81% of businesses said they had been negatively affected, mainly through higher fuel and energy costs. Nearly 58% reported an increase in energy expenses, while 73% said their overall costs had risen.

Looking ahead, 76% of firms said conditions would worsen further if regional instability continues over the next three months.

Gallup Pakistan said the decline across all major indicators pointed to a clear shift toward pessimism, with external cost pressures playing a central role in shaping business sentiment.