Businesses bet on holiday rebound despite inflation gloom

MANILA – Philippine businesses stayed pessimistic about the economy in September 2026, blaming high fuel and energy costs and rising prices, even as they expected conditions to improve over the next three to 12 months, the Bangko Sentral ng Pilipinas said in the results of its latest Business Expectations Survey released Oct. 30.

The overall business confidence index for the current quarter stood at -8.4 percent in September, an improvement from -10.9 percent in August but still in negative territory, meaning more firms were pessimistic than optimistic about the economy.

The reading matters for ordinary Filipinos because the same firms that set hiring, pricing, and expansion plans are signaling that the cost pressures squeezing households are also squeezing them, at a time when consumers are already paying more for food, fuel, and transport.

The survey landed in a month when headline inflation accelerated to 7.2 percent, from 6.1 percent in August, matching April’s three-year high, far above the government’s 2.0 to 4.0 percent target band.

Aside from fuel, energy, and rising prices, respondents cited tensions in the Middle East, the depreciation of the peso, and weather-related disruptions as reasons for their gloomy view of the current quarter.

Short-term optimism

Firms were considerably more upbeat about the coming months.

The confidence index for the next three months was 20.9 percent in September, down from 24.6 percent in August but still firmly positive.

The BSP said near-term optimism was driven by expectations of higher business activity during the holiday season and the rice harvest season.

Respondents were also optimistic about the year ahead, although less so than in the previous round.

The 12-month-ahead confidence index fell to 26.5 percent in September from 36.4 percent in August, a drop of nearly 10 percentage points.

Year-ahead optimism reflected growth opportunities in selected sectors, particularly healthcare, education, tourism, financial services, real estate development, and trade-related activities, the BSP said.

Firms also pointed to lower inflation, streamlined business procedures, a possible resolution of the Middle East conflict, and improved investor confidence as factors that could support growth over the next 12 months.

Inflation expectations

Respondents expected inflation to remain above 4.0 percent over the coming year.

That figure is the upper bound of the BSP’s tolerance range of 1 percentage point above or below its 3.0 percent inflation target.

The employment outlook 12 months ahead remained positive but was less favorable than in the previous survey round, the central bank said.

More industry firms planned to expand operations.

Policy backdrop

The results arrived just over a week after the BSP delivered its most aggressive policy move in years.

The Monetary Board raised the benchmark interest rate by 50 basis points to 5.50 percent on Oct. 22, citing rising inflation and a weakening peso, in its fourth consecutive increase this year.

The move brought cumulative rate hikes to 125 basis points since the BSP began tightening in April, and the peso closed at a record low of PHP 63.52 to the dollar shortly after the announcement.

BSP Governor Eli Remolona Jr. said inflation is expected to stay elevated through next year, returning to the target range only by 2028, and the Monetary Board remains open to further hikes at its final scheduled meeting on Dec. 17.

Higher policy rates typically translate into costlier bank loans for businesses and consumers, which can dampen the very expansion plans firms reported in the survey.

The BSP said it 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 the central bank considers in its monetary policy decisions, it added.

 

Survey details

The September 2026 Business Expectations Survey was conducted from Sept. 4 to 30.

It covered 515 firms nationwide, consisting of 193 companies in the National Capital Region and 322 firms in areas outside the capital, spanning all 18 regions of the country.

Samples were drawn through stratified random sampling from the Bureau van Dijk database of the Top 7,000 Corporations, ranked by total assets in 2017.

The nationwide response rate was 49.9 percent, with a sampling error margin of plus or minus 6.0 percent.