Business sentiment in the Philippines fell to its weakest level in more than 25 years in March, as rising fuel costs linked to geopolitical tensions weighed on consumer spending expectations.
The data, reported by Wealth Insights.ph and based on figures from the central bank, Bangko Sentral ng Pilipinas (BSP), signal a sharp deterioration in the business outlook.
The downturn comes amid earlier AGB reporting that an oil price shock could also pressure the gaming sector by reducing disposable income.
The BSP’s latest Business Expectations Survey showed the confidence index (CI) for March dropped sharply to -24.3 percent, from 8.2 percent in February. The reading marks the lowest level since late 2001, indicating a significant shift toward pessimism among surveyed firms.
The central bank attributed the decline primarily to the economic impact of the ongoing Middle East conflict, which has driven up global oil prices. Higher fuel costs have translated into increased domestic prices, raising concerns that consumer spending will weaken as households face rising costs for goods and services.
Forward-looking indicators also deteriorated. The three-month-ahead CI fell to -17.3 percent, while the year-ahead index dropped to 11.7 percent, both reflecting reduced optimism about economic conditions. Firms cited expectations that the effects of higher energy prices would persist, continuing to weigh on business activity and demand.
Financial conditions also tightened. The survey showed firms reporting weaker cash positions, with the financial condition index declining further into negative territory. Access to credit also worsened, suggesting businesses may face greater difficulty securing financing in the near term.
Businesses also highlighted structural challenges, including intense domestic competition, insufficient demand, and elevated interest rates. Rising production costs linked to higher oil prices were identified as an emerging constraint.
Employment expectations weakened, with hiring outlook indicators turning slightly negative for the coming quarter and declining further for the year ahead. However, some firms indicated they would proceed with expansion plans already in progress before the escalation of geopolitical tensions.
On the macroeconomic front, respondents expect the Philippine peso to depreciate further and borrowing costs to rise. Inflation expectations also increased, with businesses projecting higher price levels in the coming months. Headline inflation in March reached 4.1 percent, while the BSP forecasts inflation to remain above its target ceiling in the near term.
The March survey covered 515 firms and was conducted throughout the month, capturing sentiment following the onset of geopolitical disruptions in global energy markets.
