MANILA, Philippines — Philippine businesses turned sharply pessimistic in July as renewed tensions in the Middle East, higher oil prices and persistent inflation weighed on economic sentiment, according to the Bangko Sentral ng Pilipinas (BSP).

The BSP’s latest Business Expectations Survey (BES) showed the overall business confidence index plunging to -20.3% in July from 0% in June. A negative reading means pessimistic firms outnumbered optimistic ones.

The deterioration came as businesses confronted renewed geopolitical risks and higher fuel costs, particularly disruptions affecting oil shipments through the Strait of Hormuz. Firms said these pressures could weaken economic activity and investor sentiment while keeping inflation elevated.

The gloom was not limited to the immediate outlook.

The three-month-ahead confidence index fell to 3.7% from 18.8%, while the 12-month-ahead index dropped to 29.4% from 42.4%.

Still, businesses remained technically optimistic about the year ahead, although far less so than in the previous survey. Firms expect economic activity to moderate and inflation to remain above the BSP’s 4% tolerance ceiling.

Tighter finances, weaker hiring

The survey also showed businesses feeling greater financial pressure. The Financial Conditions Index deteriorated to -31.4% in July from -26.8% in June, while the Credit Access Index slipped to -7% from -5.7%.

Employment prospects likewise weakened, with fewer companies planning to hire additional workers over the next 12 months amid expectations of slower growth and elevated inflation.

One bright spot was the industrial sector, where more firms indicated plans to expand operations in the year ahead.

Businesses also expect inflation to remain uncomfortably high, with their 12-month inflation forecast at 5.6%, above the BSP’s 4% tolerance ceiling. Respondents cited the possibility of additional oil-price increases and uncertainty over when the Middle East conflict would be resolved.

The July survey was conducted from July 7 to 31 and covered 506 firms nationwide—193 in Metro Manila and 313 outside the capital, representing all 18 regions.

The BSP said it continues to monitor developments in the Middle East and their potential impact on business and consumer sentiment, household spending, corporate investment and other economic activity. Business and consumer sentiment are among the indicators considered by the central bank in setting monetary policy.

The survey results were released on September 4, the same day the BSP’s latest release calendar listed the July 2026 BES.

The message from the business sector is increasingly difficult to ignore: optimism has given way to caution, and caution is now edging into outright pessimism.