PHILIPPINE business sentiment turned pessimistic in July 2026 amid renewed concerns over tensions in the Middle East, higher oil prices, and persistent inflationary pressures, according to the central bank’s Business Expectations Survey (BES).
Results of the survey showed that firms’ confidence index (CI) turned negative in July, at -20.3 percent, from neutral or 0 percent in June.
A negative CI means that more respondents are pessimistic than optimistic about the economy, the Bangko Sentral ng Pilipinas (BSP) explained.
The survey noted that the pessimistic outlook in July was attributed to renewed tensions, higher oil prices amid disruptions in fuel shipments through the Strait of Hormuz and persistent inflationary pressures.
Meanwhile, firms said they experienced tighter financial conditions in July, with the Financial Conditions Index plunging further to -31.4 percent in July compared to the -26.8 percent in June.
The central bank said financial condition refers to the firm’s general cash position considering the level of cash and other cash items and repayment terms on loans.
Businesses also experienced tighter credit access, with the index declining to -7 percent in July from -5.7 percent in June.
Access to credit refers to the availability of credit in the banking system and other financial institutions.
Three- and twelve-month outlook
The survey revealed that firms turned less optimistic over the three- and twelve-month horizon.
Firms were less optimistic about October 2026 or three months since this survey was conducted due to the continued geopolitical tensions in the Middle East, rising fuel costs and weaker investor sentiment.
The survey showed that firms’ confidence index for the three-month outlook plunged to 3.7 percent in July from the 18.8 percent in June.
Businesses also turned less optimistic about their outlook 12 months from the survey was conducted, or by July 2027, due to concerns over the economic impact of a ‘protracted’ Middle East conflict, lower growth prospects due to elevated energy prices and less upbeat investor confidence due to governance-related issues.
The survey showed that firms’ confidence index for the 12-month outlook declined to 29.4 percent in July from 42.4 percent in June.
Economic prospects
According to the survey, employment prospects were less favorable as the share of businesses planning to hire more workers over the next 12 months declined.
In contrast, the share of industry firms intending to expand operations increased.
Firms also expect inflation in the next 12 months to average at 5.6 percent, exceeding the central bank’s 4-percent tolerance ceiling.
Businesses expecting higher inflation cited the following concerns: more oil price hikes and uncertain timeline for the resolution of the Middle East conflict.
The BSP said it continues to monitor the economic implications of developments in the Middle East, particularly their impact on business and consumer sentiment, as well as household and corporate spending and investment decisions.
‘Business and consumer sentiment are among the data points that the BSP considers in setting monetary policy,’ the central bank said in its statement on Friday.
According to BSP, the July 2026 BES was conducted from July 7 to 31,2026. There were 506 firms surveyed nationwide, consisting of 193 companies in the National Capital Region (NCR) and 313 firms in areas outside the NCR, covering all 18 regions across the country.