PERSISTENT concerns over fuel prices, inflation and geopolitical tensions continued to weigh on Philippine businesses in September, keeping overall confidence in negative territory, according to the Bangko Sentral ng Pilipinas’ (BSP) latest Business Expectations Survey (BES).
The September BES showed that overall business confidence index improved to -8.4 percent from -10.9 percent in August.
“Firms attributed this pessimism mainly to elevated fuel and energy costs and rising prices,” the central bank said, adding that other concerns included Middle East tensions, peso depreciation, and weather-related disruptions.
Among firms that were pessimistic about economic conditions, 40 percent cited elevated fuel and energy costs as a major concern, while 36 percent pointed to rising inflation due to increasing prices of goods and commodities.
Geopolitical tensions in the Middle East were cited by 26 percent of pessimistic respondents, followed by peso depreciation at 16 percent and weather-related disruptions to business operations and production at 14 percent.
Near-term outlook
Despite the negative assessment of current conditions, businesses remained optimistic about the next three months, although their outlook weakened compared with August.
The business confidence index for the next three months fell to 20.9 percent in September from 24.6 percent in August, reflecting a more cautious outlook for economic activity toward the end of the year.
The BSP said firms maintained optimism for December because they anticipate an increase in business activity during the holiday season and rice harvest period. These seasonal factors accounted for 86.8 percent of positive responses cited in the survey.
However, expectations of stronger activity during this period have yet to translate into a more positive assessment of current business conditions.
For the 12-month outlook, the business confidence index declined to 26.5 percent in September from 36.4 percent in August, indicating that firms remained optimistic about the longer-term outlook but were less upbeat than they had been a month earlier.
Businesses attributed their longer-term optimism to expectations of improving demand for healthcare, education, tourism, financial services, real estate development and trade-related activities.
Other factors supporting their outlook included expectations of easing inflation, streamlined business procedures, a possible resolution of the Middle East conflict and improved investor confidence.
The survey showed that some aspects of businesses’ operating conditions improved in September.
The current-month business activity index rose to 12.1 percent from 7.0 percent in August. However, the index for total orders booked declined to 8.8 percent from 12.4 percent.
Average capacity utilization among firms in industry and construction increased to 73.5 percent in September from 69 percent in August.
The financial condition index also improved to -19.8 percent from -24.9 percent.
Access to credit remained tight, with the corresponding index unchanged at -7.2 percent.
The survey identified “stiff domestic competition, insufficient demand and high interest rates” among the leading constraints confronting businesses.
Businesses also adopted a more cautious stance toward employment, with the index measuring hiring intentions over the next 12 months falling to 14.4 percent in September from 30.7 percent in August.
The decline indicated that optimism about future hiring weakened considerably, although the positive reading meant that firms planning to increase employment still outnumbered those anticipating a reduction.
The index for expected business activity over the next 12 months likewise fell to 31.5 percent from 39.6 percent.
However, the share of industry firms planning to expand operations over the next year increased to 22.8 percent in September from 17.1 percent in August.
“Firms also continued to see growth opportunities across selected sectors, supported by lower inflation, streamlined business procedures, a possible resolution of the Middle East conflict, and improved investor confidence,” the central bank said.
Inflation, currency concerns
Inflation remained a key concern for businesses, with firms expecting price pressures to persist over the coming year.
The survey’s year-ahead inflation point forecast increased to 5.7 percent in September from 5.4 percent in August, remaining above the BSP’s 2-4 percent inflation target range.
Among businesses expecting higher inflation over the next 12 months, 43.9 percent cited continued oil price increases.
Uncertainty over the resolution of the Middle East conflict was identified by 24.2 percent, while 19.7 percent pointed to peso depreciation.
Businesses also anticipated further currency weakness and higher borrowing rates.
The survey’s exchange-rate expectations indicated a peso-dollar rate of P62.75 in December 2026 and P62.98 in September 2027, compared with expectations of P61.46 and P61.45, respectively, in August.
Meanwhile, the index measuring expectations of higher peso borrowing rates increased to 20.3 in the three-month outlook from 15.4 in August. For the 12-month outlook, the index rose to 9.2 from 8.2.
