By Katherine K. Chan, Reporter
Business sentiment worsened further in April as firms expressed worries over heated inflation driving up operating costs and weakening consumer spending amid the Middle East war, a survey from the Bangko Sentral ng Pilipinas (BSP) showed.
Based on the central bank’s latest business expectations survey (BES), local firms’ current-month confidence index (CI) further slumped to -35.8% in April from -24.3% in March.
This was the worst CI seen because the central bank began issuing the BES on a monthly basis in January.
A negative CI shows that more respondents are pessimistic than optimistic.
“Philippine businesses proceed to be affected by the Middle East conflict, as confidence in April declined for the second consecutive month,” the central bank said in an announcement on Friday. “This was driven by concerns that higher inflation could raise firms’ operating costs and erode households’ purchasing power.”
Nevertheless, local businesses had a greater outlook for the approaching months as their CI for the subsequent three months and the yr ahead improved.
For July, firms had a CI of -7.5% from -17.3% a month ago as consumer demand for the upcoming school season is anticipated to spice up business conditions.
“Firms were less pessimistic in regards to the next three months mainly because the beginning of the educational yr for most faculties is anticipated to drive demand for loans and financing products, in addition to for clothing and apparel,” the BSP said of their report.
Meanwhile, their CI for the subsequent 12 months climbed to 19.5% from 11.7% as businesses hope for economic recovery amid a possible resolution to the Middle East war.
“Looking 12 months ahead, they were more optimistic resulting from anticipated stronger demand for business process outsourcing, construction, and transportation services,” the central bank said.
“Respondents also cited expectations of upper sales and income, higher overall economic conditions, and a possible resolution of the Middle East conflict as additional reasons for his or her improved outlook,” it added.
FINANCIAL, ECONOMIC OUTLOOK DIMS
Then again, Philippine firms’ financial condition index and credit access index declined in April.
Based on the identical survey, businesses’ financial condition index further slipped to -35.5% from -24.9% in March. This refers to a firm’s general money position considering the extent of money and other money items and repayment terms on loans.
The credit access index, which refers back to the firm’s external environment, akin to the provision of credit within the banking system and other financial institutions, also fell to -9.9% in April from -7.1% within the prior month.
The common capability utilization for the industry and construction sectors stood at 69.9% as more industry and construction firms operated below their 50% capability amid strict domestic competition, weak demand and high rates of interest in the course of the period. This was down from 73.1% in March.
“As well as, firms indicated that the high price of oil amid the continued Middle East conflict as an extra constraint given its direct impact on their production costs,” the BSP added.
Still, firms were more willing to rent within the short term, with the employment outlook index for the subsequent three months rising to six.1% from -0.1%, while the outlook for April 2027 eased to 9.5% from 10%.
Nevertheless, concerns stemming from the Middle East war continued to weigh on businesses’ expansion plans.
“Despite a more favorable 12-month-ahead overall business outlook, fewer firms indicated plans to expand resulting from heightened demand uncertainty resulting from the Middle East conflict,” the central bank said.
Only 14% of industry firms plan to expand in July, while 19% are open to doing so in the approaching yr. These were down from 28.8% and 30.7%, respectively.
The BES likewise showed that companies expect the peso to stay weak against the dollar this yr before recovering over the subsequent yr.
Firms surveyed projected the currency to average P59.90 per dollar last month, P60.14 in July and P60.11 in April 2027.
On April 30, the local unit closed at P61.485 versus the greenback, falling by 73.7 centavos from its P60.748 finish on March 31. Separate BSP data showed it averaged P60.2913 per dollar in April.
Inflation can even likely stay above the central bank’s 2%-4% goal until April next yr, in keeping with the survey.
In April, businesses estimated the headline print to settle at 4.2% and expected it to quicken to 4.2% in July before easing to 4.2% in the subsequent 12 months.
Inflation hit 7.2% in April, the fastest pace in over three years, as high oil prices pushed up the associated fee of other key commodities akin to food and utilities.
The central bank surveyed 507 firms nationwide, with 193 from the National Capital Region (NCR) and 314 in areas outside NCR, from April 7-30.
“The BSP continues to closely monitor the impact of the continued Middle East conflict on domestic prices and the broader economy,” the central bank said. “It stands able to take needed monetary motion to stop de-anchoring of inflation expectations from the 3-percent goal to guard households and businesses.”