Business sentiment improved slightly in September, though companies remained pessimistic as stubbornly high inflation, a weakening peso and geopolitical tensions continued to weigh on confidence, the Bangko Sentral ng Pilipinas (BSP) said.
A nationwide survey of 515 companies showed the business confidence index rose to -8.4 percent from -10.9 percent in August. The negative reading, however, meant pessimists still outnumbered optimists.
Businesses cited persistent inflation, the peso’s depreciation, the prolonged conflict in the Middle East and weather-related disruptions to operations as reasons for their downbeat outlook.
Their expectation of future inflation also worsened. Companies now expect price growth to hit 5.7 percent over the next 12 months, up from their previous forecast of 5.4 percent.
Firms anticipating faster price increases pointed to continued oil price hikes, uncertainty over the outcome of the US-Iran conflict and further weakness in the peso.
The survey comes as the BSP steps up its fight against inflation. In October, the central bank surprised markets with a jumbo 50-basis-point interest rate increase, bringing its benchmark policy rate to 5.5 percent.
BSP Governor Eli Remolona Jr. cited risks from elevated oil prices, potentially sharp wage increases and food supply disruptions linked to the ongoing El Niño episode.
The central bank expects inflation to average 6.1 percent this year, well above its 3-percent target. It also raised its inflation forecast for 2027 to 6 percent from 5.4 percent, although it expects price growth to ease to 3.3 percent in 2028.
Despite the tighter monetary policy, businesses expect their overall cash position to improve, with fewer firms anticipating financial constraints. Access to credit, however, is expected to remain tight.
Hiring plans also became more cautious, as the share of companies intending to increase their workforce over the next 12 months declined. By contrast, more firms in the industry sector said they planned to expand operations.
Looking ahead, businesses were less optimistic about the near-term outlook. The confidence index for the next three months fell to 20.9 percent from 24.6 percent in the previous survey, reflecting diminished expectations for business conditions.