BUSINESS sentiment in the Philippines deteriorated sharply in March from a month earlier while consumers were less downbeat on a quarterly basis, the Bangko Sentral ng Pilipinas (BSP) reported on Friday.
Business and consumer expectation survey results released by the BSP showed companies bracing for the fallout from the war in the Middle East and consumers taking heart from stable job and income expectations.
The overall confidence index among companies plunged to -24.3 percent in March from 8.2 percent in February, underscoring sensitivity to rising input costs and external shocks.
“Firms attributed their pessimism in March 2026 to the ongoing Middle East conflict, which had led to a sharp increase in domestic pump prices,” the BSP said.
“Businesses consequently expect consumer spending to slow, as higher fuel costs are seen to feed into the prices of other basic goods and services,” it added.
The confidence index for the next three months fell into negative territory at -17.3 percent from +37.4 percent while the 12-month outlook dropped sharply to 11.7 percent from 51.1 percent.
Firms said the anticipated persistence of geopolitical tensions and cost pressures would continue to weigh on economic activity.
The financial condition index, meanwhile, declined further to -24.9 percent while the access to credit index slipped to -7.1 percent, suggesting that firms are facing weaker cash positions and more constrained financing conditions.
Businesses cited high interest rates, insufficient demand and intense domestic competition as key constraints alongside rising production costs due to oil price increases.
Hiring intentions for the next quarter also slid to -0.1 percent from 27.2 percent while that for the next 12 months eased to 10.0 percent from 30.0 percent, pointing to a more cautious approach to workforce expansion.
Meanwhile, the BSP said that Filipino households were less pessimistic with the overall consumer confidence index improving to -15.8 percent in the first quarter from -22.2 percent three months earlier.
“Respondents were less pessimistic in Q1 2026 as they expect higher earnings, stable jobs, new income sources, and more family members joining the workforce,” the central bank said.
However, the consumer outlook for the near term and the year ahead was less upbeat, dropping to 1.8 percent from 3.6 percent for the second quarter and 9.6 percent from 11.8 percent for the next 12 months.
“The less upbeat outlook of consumers for both periods reflected concerns over graft and corruption in the government, higher inflation and ineffective government policies and programs,” the BSP said.
While households remained generally willing to spend, the outlook for expenditures on most goods and services — including food, transport and housing — became less optimistic.
At the same time, buying intentions for big-ticket items such as houses and vehicles, although still negative, showed modest improvement.
Both surveys pointed to rising inflation expectations as a key concern. Businesses expect inflation to accelerate to 3.1 percent by June and 3.3 percent over the next 12 months, slightly above the BSP’s 3.0-percent target.
Consumers likewise anticipate higher inflation, driven largely by food prices and supply constraints, although their expectations moderated compared to the previous quarter.
Expectations of peso depreciation and higher borrowing costs further underscored the cautious outlooks. Both firms and households see a weaker peso and rising interest rates over the near and medium term, which could add pressure on consumption, investment and overall economic growth.
