South Korea's business sentiment dropped this month due to economic uncertainties stemming from Europe's debt crisis, a report by the central bank showed Monday.

The monthly business survey index (BSI), which gauges local manufacturers' assessment of current business conditions, tumbled 11 points on-month to 71 in July, keeping its downward trend for the third straight month, according to the Bank of Korea (BOK). The seasonally-adjusted figure plunged 10 points to 68 over the same period.

The BSI for August, measuring manufacturers' outlook on business conditions for the upcoming month, dropped 11 points on- month to 70, posting the third straight month of decline. The reading adjusted with seasonal factors plummeted 12 points to 69.

The worsening sentiment over economic conditions came as concerns remained over the European fiscal crisis. Spain's government bond yield continued to surge to a new record high recently, fueling expectations that the country may have to seek a full-scale bailout.

Local manufacturers listed uncertain economic conditions, weak domestic demand and weak exports as major difficulties in doing business.

The monthly index for non-manufacturers declined 8 points on- month to 67 in July, and the index for August retreated 7 points to 69. Non-manufacturers picked economic uncertainties, fragile domestic demand and fierce competition as their hardship.

The BSI index is based on a nationwide survey of 1,430 manufacturers and 1,016 non-manufacturers, conducted between July 16 and 23.

Meanwhile, the central bank started compiling the economic sentiment index (ESI) from June in a bid to offer comprehensive sentiment of the private sector, including consumers and businesses.

The ESI, which reflects both the consumer sentiment index (CSI) and the BSI, was down 4 points on-month to 92 in July, according to the BOK.

The reading below 100 means the private sector's sentiment over the current economic conditions is weaker than the long-term average sentiment in the past.