Philippine business confidence rebounds to neutral in June

By Francis Allan L. Angelo

MANILA — Philippine business confidence returned to neutral territory in June as companies expected stronger consumer spending at the start of the academic year and lower oil and energy costs, according to the Bangko Sentral ng Pilipinas.

The overall business confidence index rose to 0.0 percent from minus 25.2 percent in May, meaning optimists and pessimists were nearly equal in number. The outlook also strengthened across longer horizons, with the three-month confidence index climbing to 18.8 percent from 0.6 percent and the 12-month index rising to 42.4 percent from 27.8 percent.

The improvement matters because stronger business confidence can encourage companies to increase production, invest, and hire. However, firms still reported tight financial conditions and expected inflation and borrowing costs to rise, risks that could limit expansion and affect jobs, household incomes, and consumer prices. 

Consumer spending lifts sentiment

Among firms reporting a better June outlook, 61.8 percent cited increased consumer spending as the 2026 academic year began, while 11.8 percent pointed to lower oil prices and energy costs.

For September, 26.7 percent of companies with a more favorable outlook expected higher household consumption, while 13.3 percent cited moderating inflation pressures.

For June 2027, 21.6 percent of firms reporting improved expectations cited stronger demand for goods and services. A possible resolution of the Middle East conflict was cited by 14.4 percent, while 12.4 percent pointed to better domestic and international economic conditions.

Business activity and capacity utilization improve

The confidence index for the volume of business activity rose to 8.3 percent in June from minus 4.5 percent in May, while the index for total orders booked improved to 5.4 percent from minus 2.2 percent.

The three-month business activity outlook increased to 28.4 percent from 19.3 percent, while the 12-month index strengthened to 31.9 percent from 21.9 percent.

Average capacity utilization among industry and construction firms climbed to 73.9 percent from 70.5 percent. The calculation includes firms reporting zero capacity utilization, consistent with Philippine Statistics Authority Board Resolution No. 13, Series of 2020, which accounts for establishments that were temporarily closed.

Financial conditions remain tight

The financial conditions index slipped to minus 26.8 percent from minus 25.7 percent, indicating that companies continued to face pressure on cash positions and loan repayment terms.

Access to credit became less restrictive, with the index improving to minus 5.7 percent from minus 7.3 percent. The indicator measures the availability of financing from banks and other financial institutions.

Domestic competition remained the most common business constraint, cited by 56.7 percent of firms, down from 62.4 percent in May. Insufficient demand was cited by 35.1 percent, compared with 35.3 percent, while financial problems were reported by 19.5 percent, up from 12.9 percent.

High interest rates were cited by 18.4 percent of firms, down from 26.9 percent. Labor problems were reported by 11.9 percent, unclear economic laws by 10.6 percent, lack of equipment by 9.6 percent, lack of material inputs by 8.8 percent, and difficulty accessing credit by 8.5 percent.

Other constraints were cited by 25.8 percent of respondents, while 7.6 percent reported no business constraints.

Hiring and expansion plans strengthen

The employment outlook remained positive, although the three-month hiring index fell to 1.8 percent from 11.9 percent. The 12-month employment outlook was broadly steady at 20.2 percent, compared with 20.4 percent in May.

The share of firms planning to expand within three months rose to 20.4 percent from 9.7 percent. Among industry firms, 18.7 percent intended to expand within 12 months, up from 11.8 percent.

The BSP said the planned hiring and expansion could support economic growth in 2027.

Inflation expectations remain elevated

Businesses expected inflation to increase in June, September, and over the next 12 months, although fewer firms anticipated stronger price pressures than in the previous survey.

The current-month inflation confidence index fell to 35.8 percent from 63.6 percent, while the three-month index declined to 31.9 percent from 48.6 percent. The 12-month index eased to 5.7 percent from 18 percent.

Firms projected inflation at 6.2 percent for June, compared with 6.6 percent in May. Their three-month forecast was 6.1 percent, also down from 6.6 percent, while the year-ahead estimate eased to 5.6 percent from 5.9 percent.

The year-ahead forecast remained above the BSP’s 4-percent tolerance ceiling. Companies expecting higher inflation cited elevated energy costs and supply constraints, the continuing Middle East conflict, and peso depreciation.

The BSP said it continued to monitor developments in the Middle East because of their potential effects on business and consumer sentiment, household spending, and investment decisions.

Borrowing costs seen rising

More companies expected peso borrowing rates to increase across all three survey horizons.

The current-month borrowing-rate index rose to 10.4 percent from 6.8 percent. The three-month index increased to 14.1 percent from 10.9 percent, while the 12-month index climbed to 25.2 percent from 23.8 percent.

Higher financing costs could restrain working-capital borrowing, investment, and hiring, particularly among firms with limited cash buffers.

Peso outlook improves

Companies expected the peso to depreciate during the current month but appreciate over the next three and 12 months.

The current-month exchange-rate index improved to minus 6.1 percent from minus 30.4 percent. The three-month index turned positive at 0.5 percent from minus 14.1 percent, while the 12-month index rose to 7.7 percent from 4.6 percent.

Firms projected an exchange rate of PHP 61.33 per USD 1 for June, compared with PHP 60.86 per USD 1 in the May survey.

Their three-month projection was PHP 61.47 per USD 1, compared with PHP 61.27 per USD 1, while the year-ahead estimate was PHP 61.11 per USD 1, compared with PHP 61.21 per USD 1.

Regional outlook diverges

Business sentiment in the National Capital Region turned positive, while companies outside the capital remained slightly pessimistic.

The current-month confidence index for NCR firms rose to 1.1 percent from minus 26.7 percent. The index for companies in areas outside the NCR improved to minus 2.6 percent from minus 21.8 percent.

The three-month outlook for NCR firms climbed to 19.8 percent from 1.6 percent, while the corresponding index outside the NCR rose to 16.8 percent from minus 1.7 percent.

The 12-month outlook increased to 44.3 percent from 29.3 percent in the NCR and to 38.1 percent from 24.5 percent outside the capital.

Exporters lead current-month confidence

Exporters recorded the strongest current-month confidence among trading groups at 22.2 percent, up from 0.0 percent in May. Firms that both import and export posted 7.7 percent, improving from minus 38.5 percent.

Importers remained pessimistic at minus 13.3 percent, compared with minus 16.1 percent, while domestic-oriented companies registered minus 10.9 percent, improving from minus 22.3 percent.

For the next three months, firms engaged in both importing and exporting posted the strongest outlook at 34.6 percent, up from 11.5 percent. Exporters rose to 11.1 percent from minus 11.1 percent, domestic-oriented firms increased to 9.8 percent from 0.7 percent, and importers remained negative at minus 3.3 percent, compared with minus 9.7 percent.

For the next 12 months, companies engaged in both importing and exporting recorded the highest index at 53.8 percent, up from 38.5 percent. Exporters posted 44.4 percent, down from 55.6 percent, while domestic-oriented firms rose to 41.4 percent from 22.3 percent. Importers registered 13.3 percent, compared with 12.9 percent.

Large firms most optimistic long term

Medium-sized firms were the only employment-size group with a positive current-month index, at 1.1 percent, compared with minus 6.3 percent in May.

Large firms improved to minus 2.9 percent from minus 44 percent, while small firms rose to minus 15.5 percent from minus 21.8 percent.

For the next three months, medium-sized firms posted 19.3 percent, compared with 19 percent. Large firms improved to 17.1 percent from minus 12 percent, while small companies rose to 1.9 percent from minus 6.5 percent.

Large companies were the most optimistic over the next 12 months, with an index of 68.6 percent, up from 36 percent. Medium-sized firms registered 45.5 percent, compared with 41.3 percent, while small firms posted 27.2 percent, up from 12.9 percent.

The BSP conducted the Business Expectations Survey from June 5 to 30 and covered 515 firms nationwide.

The sample included 193 companies in the NCR, representing 37.5 percent of respondents, and 322 firms outside the capital, accounting for 62.5 percent. The survey covered all 18 regions.

The sample was 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 48.3 percent, with a sampling margin of error of ±6.1 percentage points.

The statistical tables listed 249 respondents with complete sector classifications: 71 industry firms, 12 construction companies, 47 wholesale and retail businesses, and 119 service firms. These represented 28.5 percent, 4.8 percent, 18.9 percent, and 47.8 percent of classified respondents, respectively.

By trading group, the classified sample included 30 importers, 9 exporters, 26 firms engaged in both importing and exporting, 174 domestically oriented companies, and 10 that did not specify a category. Their respective shares were 12 percent, 3.6 percent, 10.4 percent, 69.9 percent, and 4 percent.

By employment size, the sample included 103 small firms with fewer than 100 employees, 88 medium-sized firms with 100 to fewer than 500 employees, 35 large firms with at least 500 employees, and 23 firms that did not specify their size. They accounted for 41.4 percent, 35.3 percent, 14.1 percent, and 9.2 percent, respectively.

The classified geographic sample comprised 88 NCR companies and 161 firms outside the NCR.