Survey shows 4 in 5 Pakistani firms hit by regional tensions and costs

A new Gallup Pakistan survey released on Wednesday has painted a darker picture of the country’s business climate, showing that companies across Pakistan are coming under mounting pressure from regional instability and rising operating costs. Published as concerns over fuel, power and broader economic uncertainty continue to shape commercial activity, the survey found that four out of every five businesses say tensions in the Middle East are already hurting them.

The findings point to a broad decline in confidence during the first quarter of 2026. Only 41 per cent of businesses described their current conditions as good, a notable drop from the previous quarter. That slide suggests many firms are no longer treating higher costs and external shocks as temporary disruptions, but as structural pressures that are changing how they plan, invest and manage daily operations.

The survey also showed that expectations for the months ahead have deteriorated further. While 44pc of firms still said they remained hopeful, a larger 57pc believed conditions would worsen. That shift pushed the net future confidence reading down sharply from the final quarter of 2025, indicating that pessimism is beginning to outweigh resilience in much of the private sector.

One of the clearest messages from the report is that energy has become a central business risk. About 81pc of firms said regional tensions were affecting them negatively, with the impact showing up mainly through higher fuel and energy costs. Around 58pc reported an increase in energy expenses, while 73pc said their overall costs had climbed. Those numbers underline how quickly international uncertainty can feed into local balance sheets in an economy where transport, power and imported inputs remain crucial for business continuity.

Inflation and input costs were identified as the biggest challenge by a large share of respondents. Roughly 62pc of businesses highlighted rising costs as their main problem, while 37pc specifically pointed to inflation. Fuel and petrol prices also emerged as a growing concern, with one in four firms saying they had become a major source of pressure. Together, those responses show that the burden on businesses is no longer confined to one sector; it is spreading across production, logistics, retail and services.

The survey also captured another long-standing weakness in Pakistan’s business environment: unreliable electricity. Around 57pc of firms said they had experienced load shedding on the day they were surveyed. That matters because power interruptions do more than interrupt production lines. They increase backup energy expenses, delay deliveries, reduce productivity and create planning uncertainty for firms already operating on tight margins.

Beyond the raw numbers, the report offers a wider signal about the direction of the economy. Business sentiment is often one of the earliest indicators of whether private investment and hiring are likely to hold up or weaken. When companies begin to expect worsening conditions, they tend to delay expansion, slow recruitment and become more cautious with working capital. In Pakistan’s case, that caution could ripple outward into employment, supply chains and consumer demand if the mood reflected in the survey persists.

The deterioration in views about the country’s broader direction is equally significant. Gallup Pakistan’s findings showed that perceptions of the national economic trajectory fell deeper into negative territory, suggesting businesses are becoming less convinced that the policy environment will cushion them against external shocks. This is especially important at a time when firms are trying to cope with both domestic cost inflation and the fallout of events beyond Pakistan’s borders.

For Pakistan, the implications are substantial. Higher business costs can eventually translate into more expensive goods and services, weaker industrial momentum and reduced competitiveness. If energy prices remain elevated and regional tensions continue to unsettle markets, companies may face even greater pressure in the coming months. The strain could be felt not only by large manufacturers and exporters, but also by small and medium-sized enterprises that have fewer buffers against volatility.

The next phase will depend heavily on whether regional conditions stabilise and whether policymakers can ease the cost burden facing industry and commerce. If fuel and electricity pressures persist, business confidence may weaken further and drag on broader economic recovery. But if external tensions soften and domestic energy management improves, the current downturn in sentiment could still be contained before it turns into a more entrenched slowdown in private-sector activity.