The Pakistan Business Confidence Index has suffered a major setback in the second quarter of 2026, highlighting growing anxiety among businesses over inflation, rising fuel costs, geopolitical instability, and weakening investment activity.
According to the latest Wave 29 Business Confidence Survey released by the Overseas Investors Chamber of Commerce and Industry (OICCI), overall business confidence dropped by nine percentage points, falling from 22% to just 13%.
The sharp decline reflects increasing concerns among businesses that Pakistan’s economic recovery is losing momentum amid the ongoing conflict in the Middle East and mounting domestic challenges.
Pakistan Business Confidence Index Signals Growing Economic Stress
The latest survey paints a worrying picture of the country’s business environment.
Companies across multiple industries reported that regional instability has disrupted supply chains, increased operating costs, and forced many firms to rethink expansion plans.
Perhaps the most alarming finding was the collapse in investment sentiment. The New Investment Index fell by 10 percentage points to only 2%, suggesting that many businesses have effectively paused short-term investment decisions.
Between 70% and 80% of surveyed companies reported delaying, reducing, or restructuring investment plans while seeking alternative supply routes to protect themselves from disruptions linked to the Middle East conflict.
Services Sector Faces the Biggest Blow
The Services sector emerged as the biggest casualty of deteriorating business confidence.
Its confidence score plunged by 20 percentage points, dropping from 34% to 14%. The Manufacturing sector also experienced a decline of seven points, reflecting concerns about rising input costs and weaker market demand.
The Retail and Wholesale sector was the only bright spot in the survey, posting a modest improvement of three percentage points to reach a positive 20%.
This limited improvement suggests that consumer spending remains somewhat resilient despite broader economic pressures.
Foreign Investors Remain Surprisingly Resilient
Despite widespread concerns, foreign investors demonstrated notable resilience.
OICCI member companies, which represent some of Pakistan’s largest multinational investors and account for a significant share of foreign direct investment, improved their confidence level slightly from 27% to 28%.
This suggests that while short-term challenges remain severe, major international investors continue to see long-term potential in Pakistan’s economy.
The survey also revealed growing interest among these companies in generative artificial intelligence and digital transformation initiatives, indicating that many businesses are continuing to invest in future competitiveness despite current uncertainties.
Inflation and Taxes Top Business Concerns
The survey identified inflation as the most serious threat facing businesses in Pakistan.
A staggering 84% of respondents cited inflation as the biggest obstacle to growth. High taxation followed closely, with 79% expressing concerns about the country’s tax burden.
Meanwhile, 61% of businesses highlighted currency stability issues and inconsistent government policies as major risks affecting business planning and investment decisions.
These findings underline the challenges policymakers face in restoring confidence and encouraging private-sector growth.
Business Outlook Turns Increasingly Pessimistic
Business leaders are becoming increasingly cautious about the future.
Around 34% of survey participants expect business conditions to worsen over the next six months, compared with 22% in the previous survey.
The perception of the global business environment also deteriorated sharply, with the relevant indicator falling by 31 percentage points. Most respondents believe the economic consequences of the Middle East conflict will continue for at least another six months.
According to OICCI Secretary General M. Abdul Aleem, businesses are operating in an increasingly complex environment where geopolitical risks, supply chain disruptions, and investment uncertainty are creating significant challenges.
Regional Divide Emerges in Business Confidence
The survey also highlighted a growing regional contrast.
Business confidence in Pakistan’s major metropolitan centers declined significantly, falling from 23% to 11%.
In contrast, non-metropolitan cities such as Peshawar, Quetta, Rawalpindi, Multan, Sialkot, and Sukkur recorded an improvement from 19% to 22%.
This trend suggests that economic activity outside major urban centers may be showing greater resilience despite nationwide challenges.
What the Pakistan Business Confidence Index Means for the Economy
The latest Pakistan Business Confidence Index serves as a warning sign for policymakers and investors alike.
With investment activity slowing, inflation remaining stubbornly high, and geopolitical tensions creating uncertainty, businesses are demanding policy stability, cost relief, and stronger economic management.
Since the OICCI survey represents businesses contributing nearly 80% of Pakistan’s GDP, its findings offer one of the clearest snapshots of corporate sentiment in the country.
Unless inflationary pressures ease and investor confidence returns, Pakistan may face a more challenging economic landscape in the second half of 2026.