Business sentiment in the Philippines turned pessimistic in March as firms braced for the impact of rising fuel costs and geopolitical tensions, even as consumer confidence showed signs of improvement, according to the Bangko Sentral ng Pilipinas.
Results of the BSP’s Business Expectations Survey (BES) showed that the overall business confidence index for the current month dropped sharply to -24.3 percent in March from 8.2 percent in February, indicating that more firms were pessimistic than optimistic.
‘Firms attributed their pessimism in March to the ongoing Middle East conflict, which had led to a sharp increase in domestic pump prices. Businesses consequently expect consumer spending to slow, as higher fuel costs are seen to feed into the prices of other basic goods and services,’ the BSP said.
The outlook for the near term also deteriorated, with the three-month-ahead confidence index falling to -17.3 percent from 37.4 percent, while the 12-month outlook weakened to 11.7 percent from 51.1 percent.
Businesses likewise reported tighter financial conditions and reduced access to credit. The financial condition index declined to -24.9 percent from -15.2 percent, while the credit access index slipped further to -7.1 percent from -4.0 percent.
Despite the gloom, some firms indicated plans to proceed with expansion projects already in the pipeline, even as hiring intentions turned less favorable for both the next quarter and the year ahead.
Inflation expectations among firms also trended higher, with respondents anticipating faster price increases in the coming months, alongside a weaker peso and higher borrowing costs.
In contrast, the BSP’s Consumer Expectations Survey (CES) showed that household sentiment improved in the first quarter, before the escalation of the Middle East conflict.
The overall consumer confidence index for the current quarter rose to -15.8 percent in the first quarter of 2026 from -22.2 percent in the previous quarter, reflecting a smaller share of pessimistic households.
‘Respondents were less pessimistic in the first quarter of 2026 as they expect: higher earnings, stable jobs, new income sources and more family members joining the workforce,’ the BSP said.
However, consumers turned less optimistic about the months ahead. The confidence index for the next quarter eased to 1.8 percent from 3.6 percent, while the year-ahead outlook slipped to 9.6 percent from 11.8 percent.
The BSP said the weaker outlook was driven by concerns over ‘higher inflation,’ alongside governance issues and perceived ineffective policies.
Households also expected inflation to pick up in the near term, although expectations moderated compared with the previous survey round. The average year-ahead inflation forecast edged up to 2.7 percent from 2.6 percent but remained within the central bank’s target range.
‘The BSP continues to closely monitor the impact of the Middle East conflict on domestic prices and the broader economy, and stands ready to take appropriate monetary policy action should rising oil prices lead to more persistent inflationary pressures,’ the central bank said.
‘To provide targeted relief, the BSP has also issued regulatory measures to enable banks to assist affected clients,’ it added.
The BES was carried out from March 5 to 31, covering 515 firms nationwide. Meanwhile, the CES was conducted from Jan. 22 to Feb. 5, prior to the onset of the Middle East conflict, with a total of 5,440 households surveyed across the country.