BUSINESS sentiment deteriorated further in April as firms worried about the economic fallout from the Middle East war, particularly its impact on oil prices, inflation and consumer spending.
The overall confidence index (CI) in the Bangko Sentral ng Pilipinas’ (BSP) latest Business Expectations Survey (BES) worsened to -35.8 percent from -24.3 percent in March, indicating that more firms were pessimistic about the economy and their operations.
“Concerns over the ongoing Middle East conflict, which has kept oil prices elevated, weighed on business confidence in April 2026,” the BSP said.
“Firms reported that higher inflation could raise operating costs and erode consumers’ purchasing power,” it added.
Firms across sectors were increasingly worried about weak demand and tighter financial conditions as households continued to grapple with rising prices.
Businesses also reported a deterioration in their financial condition and access to credit during the month. The financial condition index fell to -35.5 percent from -24.9 percent while the credit access index slipped to -9.9 percent from -7.1 percent.
Insufficient demand remained one the top concerns of businesses with 42.5 percent of respondents identifying it as a key constraint, higher than the 34.4 percent recorded in March.
Average capacity utilization in the industry and construction sectors also declined to 69.9 percent from 73.1 percent, reflecting scaled-back operations among firms.
“Firms across all industry sub-sectors, except for the agriculture, fishery and forestry sub-sector, as well as those in the construction sector, scaled back operations,” the BSP said.
“In addition, firms indicated that the high price of oil amid the ongoing Middle East conflict as a further constraint given its direct impact on their production costs,” it added.
Large firms appeared to be the most pessimistic during the month. Businesses employing at least 500 workers posted a confidence index of -44.1 percent in April, worse than the -40 percent recorded in March.
Firms based in the National Capital Region (NCR) were more pessimistic than those outside Metro Manila. NCR firms registered a confidence index of -44 percent compared with -17.7 percent for firms in the rest of the country.
Despite the weaker current sentiment, businesses were less pessimistic about the near-term outlook and more optimistic over the next 12 months.
The quarter-ahead CI improved to -7.5 percent in April from -17.3 percent in March while the 12-month-ahead reading rose to 19.5 percent from 11.7 percent.
The BSP said firms expected demand to improve in the coming months due to the opening of the academic year, which could boost spending on loans, financing products, clothing and apparel.
“Looking 12 months ahead, they were more optimistic due to anticipated stronger demand for business process outsourcing, construction, and transportation services,” the central bank said.
“Respondents also cited expectations of higher sales and income, better overall economic conditions, and a possible resolution of the Middle East conflict as additional reasons for their improved outlook,” it added.
Firms projected inflation at 4.2 in the next 12 months.
They also expect the peso to weaken further against the dollar in the short term, forecasting an exchange rate of P60.14:$1 in the next three months.
The currency mostly traded in the P59-60 versus the dollar range in April but hit record lows of P61.3 and P61.567 as the month ended. It sank to fresh all-time lows of P61.721 and P61.75 against the greenback earlier in May but has since regained some ground.
