OICCI survey shows business confidence weakens as regional tensions disrupt trade routes, delay investment decisions and increase economic uncertainty
Business confidence in Pakistan weakened significantly during the second quarter of 2026 as geopolitical tensions in the Middle East disrupted trade routes, increased logistics costs and prompted foreign companies to delay investment decisions, according to a survey by the Overseas Investors Chamber of Commerce and Industry (OICCI).
The chamber’s Wave 29 Business Confidence Index (BCI) Survey showed the overall confidence index falling by 9 percentage points to a positive 13%, compared with 22% recorded in the previous survey wave.
The decline reflects mounting concerns among businesses over the economic consequences of regional instability, rising fuel prices and persistent inflationary pressures.
Investment plans delayed
One of the survey’s most notable findings was the sharp deterioration in investment sentiment.
The New Investment Index dropped by 10 percentage points to just 2%, indicating that fresh investment activity has slowed considerably.
According to the survey, between 70% and 80% of businesses across multiple sectors have either postponed planned investments or are reassessing expansion strategies while restructuring supply chains to reduce exposure to trade routes affected by the Middle East conflict.
Businesses are increasingly prioritizing operational continuity, risk mitigation and supply chain resilience over growth-oriented investments.
Services sector hit hardest
The services sector recorded the steepest decline in confidence, falling 20 percentage points to 14%.
The manufacturing sector also registered a decline of 7 percentage points, reflecting concerns about rising costs and supply chain disruptions.
The retail sector was the only segment to post an improvement, with confidence rising 3 percentage points to a positive 20%.
Global outlook worsens
The survey’s global business outlook indicator fell by 31 percentage points, highlighting growing concern among businesses about international economic conditions.
Respondents generally expect disruptions linked to the Middle East crisis to persist for more than six months, creating continued uncertainty for trade, logistics and investment planning.
“The results of Wave 29 are a clear signal that businesses operating in Pakistan are navigating an increasingly complex environment,” said M. Abdul Aleem, Secretary General of OICCI.
He said the impact of the Middle East conflict was being felt across multiple sectors, from delayed investments to supply chain restructuring, adding that restoring confidence would require policy stability and measures to ease business costs.
Inflation and taxation remain major concerns
Business expectations for the next six months also weakened.
Around 34% of respondents expect economic conditions to deteriorate further, compared with 22% in the previous survey.
Inflation remained the most frequently cited concern, with 84% of businesses identifying it as a major challenge. High taxation followed at 79%, while currency stability and policy consistency were each highlighted by 61% of respondents.
Political uncertainty and higher fuel prices were also identified as significant risks to business activity.
Foreign investors show resilience
Despite the broader decline in sentiment, confidence among OICCI member companies, which include some of Pakistan’s largest multinational investors, remained comparatively stronger.
Business confidence within OICCI member firms improved slightly to a positive 28%, suggesting that many foreign investors continue to maintain a long-term commitment to the Pakistani market despite near-term economic challenges.
Regionally, confidence in major metropolitan centers declined by 12 percentage points to 11%, while non-metropolitan cities, including Peshawar, Quetta, Rawalpindi, Multan, Sialkot and Sukkur, recorded a modest increase of 3 percentage points to 22%.
AI adoption gains momentum
The survey also highlighted increasing interest in generative artificial intelligence among leading investors.
OICCI member companies reported greater readiness to adopt AI technologies across business operations, technology infrastructure and workforce development initiatives, indicating continued investment in innovation despite current economic headwinds.
Conducted twice a year, the OICCI Business Confidence Index Survey covers businesses representing approximately 80% of Pakistan’s gross domestic product, making it one of the country’s most comprehensive measures of corporate sentiment and investment trends.
