Philippine business sentiment became less pessimistic in August due to higher demand for essential commodities, loan products and construction activities, results of the latest Business Expectations Survey (BES) of the Bangko Sentral ng Pilipinas (BSP) showed.
However, the business confidence index remained in negative territory during the month.
Based on the report, the overall Business Confidence Index (CI) improved to -10.9 percent in August 2026, from the -20.3 percent in July 2026.
A negative CI means that more respondents are pessimistic than optimistic about the economy.
‘The improved sentiment of firms in August 2026 was attributed to higher demand for goods and services,’ the survey noted.
Respondent firms noted that financial condition was less tight in August compared to July as the confidence index, albeit still negative, improved to -24.9 percent from the -31.4 percent in July.
Financial condition, the central bank said, refers to the firm’s general cash position considering the level of cash and other cash items and repayment terms on loans.
However, the report noted that firms flagged the ‘slightly tighter’ access to credit, with the index marginally declining to -7.2 percent in August, from the -7 percent in July.
According to BSP, access to credit refers to the availability of credit in the banking system and other financial institutions.
Meanwhile, firms said there was an uptick in average capacity utilization in industry and construction, with the business confidence index improving to 69 percent, slightly higher than 68.6 percent in July.
However, the top business constraints flagged were stiff domestic competition, insufficient demand, and high interest rates.
Outlook
Firms have become more optimistic for the next three months, as their confidence index for this timeframe improved to 24.6 percent compared to July’s 3.7 percent, as businesses expect an uptick in business activities by November due to the holidays and rice harvest.
Philippine businesses are also pinning their hopes on stronger demand for consumer and financial products and services in the next three months.
For the next 12 months, firms have also become more sanguine as they expect consumer spending in tourism, construction, education and financial activities to improve.
The optimistic outlook of Philippine firms also rests on their expectation that the rise in the prices of goods and services or inflation is expected to ease in the next 12 months.
Other reasons behind the more sanguine outlook of businesses in the year ahead anchor on the possible resolution of the Middle East conflict, ‘enhancement’ in business operations, and ‘improved’ investor confidence.
Meanwhile, employment prospects were ‘more favorable’ as the share of businesses planning to hire more workers both over the next three- and 12-month periods increased.
Based on the BES report, the business confidence index on employment outlook in the three-month period improved to 13.4 percent in August from the 11 percent in July.
As for the 12-month horizon, businesses’ confidence index surged to 30.7 percent in August from 9 percent in July.
In contrast, the share of industry firms intending to expand operations declined both over the three- and 12-month periods.
Over the three-month horizon, businesses’ confidence index for expansion plans dipped to 12.4 percent in August from the 13.6 percent recorded in July.
For the next 12 months, the index declined to 17.1 percent in August from the 20.8 percent in July.
Inflation expectations
While firms have pegged a lower inflation expectation for the next 12 months, they are expecting the rate to linger above 4 percent-the upper bound of BSP’s inflation target range-due to continued oil price hikes, uncertainty over the resolution of the Middle East conflict and decreasing purchasing power.
Based on the report, Philippine businesses now see inflation for the year ahead averaging at 5.4 percent compared to their 5.6 percent forecast in July.
‘The BSP continues to monitor developments in the Middle East and their potential effects on business and consumer sentiment, spending, and investment. These indicators are among those considered in the BSP’s monetary policy decisions,’ the central bank said in a statement over the weekend.