MANILA, Philippines — Philippine businesses have turned sharply pessimistic, with confidence plunging to levels that were weaker than those recorded in published business surveys during major periods of the COVID-19 crisis.
The latest Bangko Sentral ng Pilipinas (BSP) Business Expectations Survey showed the overall business confidence index collapsing to -20.3% in July 2026, from a neutral 0% in June.
A negative reading means pessimistic firms outnumbered optimistic ones.
The deterioration comes as businesses grapple with renewed tensions in the Middle East, higher oil prices, persistent inflation and increasingly difficult financial conditions.
The latest figure is particularly striking because it is below the -5.3% recorded in the third quarter of 2020 and the -5.6% registered during the Delta-driven third quarter of 2021.
However, an important distinction remains: the BSP did not conduct its regular survey during the nationwide lockdown in the second quarter of 2020, when the economic disruption was at its most severe. The survey was also quarterly at that time and has since shifted to a monthly frequency.
Middle East tensions add to business worries
According to the BSP survey, renewed geopolitical tensions were among the biggest reasons behind the deterioration in sentiment.
Businesses cited concerns over a prolonged conflict in the Middle East, higher fuel costs caused by disruptions to shipments through the Strait of Hormuz, and continuing inflationary pressures.
The impact is significant for the Philippines because the country is a net importer of oil, leaving businesses and consumers vulnerable to global energy-price shocks.
Business confidence for the next three months also weakened dramatically.
The index for the three-month outlook fell to 3.7% from 18.8%, suggesting that while firms were still technically more optimistic than pessimistic about the near term, that optimism had narrowed considerably.
The 12-month outlook suffered a similarly sharp decline, falling to 29.4% from 42.4%.
Businesses cited the possible economic consequences of a prolonged Middle East conflict, elevated energy costs and weaker investor confidence, including concerns connected to governance.
Financial pressure is also mounting
The deterioration was not limited to sentiment.
Businesses reported increasingly difficult financial conditions, with the Financial Conditions Index falling to -31.4% in July from -26.8% in June.
The credit-access index also deteriorated, dropping to -7% from -5.7%.
In practical terms, the figures point to firms feeling greater pressure on cash positions and facing a less favorable environment for obtaining credit.
Capacity utilization in the industry and construction sectors also declined to 68.6% from 73.9%.
At the same time, the employment outlook weakened. The share of firms expecting to hire more workers over the next 12 months fell, with the year-ahead employment outlook dropping to 9% from 20.2%.
That could become an important concern if weaker confidence translates into slower investment and hiring.
Inflation remains a major threat
Businesses are also preparing for inflation to remain elevated.
Firms surveyed by the BSP expect inflation to average 5.6% over the next 12 months, well above the BSP’s 2%-4% target range.
The concern is not coming from oil alone. Businesses also face weaker demand, higher financing costs and uncertainty surrounding the global economy.
The latest inflation data adds another layer to the picture.
Headline inflation eased slightly to 6.1% in August from 6.2% in July, but remained substantially higher than the 1.5% recorded a year earlier. The average inflation rate for the first eight months of 2026 stood at 5.2%, according to reports citing official data.
Economic growth is already losing momentum
The gloomy business outlook also comes against a backdrop of slowing economic growth.
The Philippine economy expanded by just 2.3% in the second quarter of 2026, down from 2.8% in the first quarter, according to the Philippine Statistics Authority.
That represented the country’s weakest quarterly growth since the fourth quarter of 2009 when excluding the COVID-19 contraction years.
First-half growth reached only 2.6%, below the government’s revised full-year target of 3.5% to 4.5%.
Household consumption also slowed, while investment was dragged down by a sharp decline in public construction.
This creates a difficult feedback loop: weaker consumer and investor demand can discourage businesses from expanding, while higher prices and financing costs can simultaneously squeeze operating margins.
Not everything is negative
Despite the broad deterioration, the BSP survey does contain some signs of resilience.
The central bank said firms remained optimistic about business prospects over the next 12 months, although considerably less so than in the previous survey.
Some companies in the industrial sector also continued to plan expansion.
The share of industry firms intending to expand operations increased to 20.8% from 18.7%, suggesting that some businesses are still willing to invest despite the more challenging environment.
That distinction is important: the latest data does not mean Philippine businesses universally expect an economic collapse.
Instead, it shows a dramatic deterioration in confidence and a growing number of risks that companies believe could weigh on activity in the months ahead.
What happens next could depend on inflation, oil and geopolitics
The BSP said it is continuing to monitor developments in the Middle East and their potential effects on business and consumer sentiment, household spending and corporate investment.
Business and consumer sentiment are among the indicators considered in monetary-policy decisions.
The July survey covered 506 companies nationwide, including 193 firms in the National Capital Region and 313 outside NCR, across all 18 regions. It was conducted from July 7 to 31, with a 48.8% response rate.
The latest numbers therefore present a warning rather than a verdict.
Philippine companies are facing a combination of geopolitical uncertainty, elevated energy costs, persistent inflation, tighter financial conditions and weaker economic growth.
And with businesses already cutting back their expectations for hiring and future activity, the bigger question is whether this sharp deterioration in confidence will remain temporary—or begin feeding into actual investment, employment and economic growth.
That is the part of the latest BSP data that businesses, investors and policymakers will be watching most closely.
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