Business confidence weakens in April, BSP survey shows

Philippine business sentiment turned more pessimistic in April 2026 as companies cited the ongoing Middle East conflict, elevated oil prices, higher inflation, rising operating costs, and weaker consumer purchasing power, the Bangko Sentral ng Pilipinas said.

Results of the BSP’s latest monthly Business Expectations Survey showed the current-month confidence index fell to -35.8 percent in April from -24.3 percent in March, marking a second straight monthly decline.

A negative confidence index means more respondents were pessimistic than optimistic about the economy.

The outlook improved for the months ahead, with the three-month-ahead confidence index rising to -7.5 percent from -17.3 percent and the 12-month-ahead index climbing to 19.5 percent from 11.7 percent.

The BSP said firms were less pessimistic about July 2026 because the start of the academic year for most schools is expected to boost demand for loans and financing products, as well as clothing and apparel.

For April 2027, respondents were more optimistic due to anticipated stronger demand for business process outsourcing, construction, and transportation services, along with expectations of higher sales and income, better economic conditions, and a possible resolution of the Middle East conflict.

Current-month business indicators weakened in April. The volume of business activity index dropped to -15.3 percent from 2.2 percent, while the volume of total orders booked index declined to -15.6 percent from -2.7 percent.

Firms also expected tighter cash positions and credit access. The financial condition index fell to -35.5 percent from -24.9 percent, while the credit access index eased to -9.9 percent from -7.1 percent.

Average capacity utilization among industry and construction firms declined to 69.9 percent in April from 73.1 percent in March, reflecting a larger share of firms operating below 50 percent capacity.

Major business constraints cited by respondents included domestic competition at 53.6 percent, insufficient demand at 42.5 percent, high interest rates at 18.4 percent, unclear economic laws at 18.4 percent, financial problems at 15.6 percent, labor problems at 10.8 percent, lack of material inputs at 6.5 percent, access to credit at 6 percent, and lack of equipment at 5.6 percent. Another 38.2 percent cited other constraints, while 3.6 percent reported none.

Hiring intentions improved for the next three months. The three-month-ahead employment outlook index turned positive at 6.1 percent from -0.1 percent, while the 12-month-ahead index stayed positive at 9.5 percent, little changed from 10 percent.

Industry expansion plans weakened despite the improved 12-month outlook. The share of industry firms with expansion plans for the next three months fell to 14 percent from 28.8 percent, while the share planning to expand over the next 12 months dropped to 19 percent from 30.7 percent.

The BSP said fewer firms planned to expand due to heightened demand uncertainty tied to the Middle East conflict.

Firms expected the peso to depreciate against the U.S. dollar in April and July 2026 but appreciate by April 2027. The exchange rate index was -41.8 percent for April, -25.5 percent for the next three months, and 3 percent for the next 12 months.

Businesses expected the exchange rate at PHP 59.90 to USD 1 in April, PHP 60.14 to USD 1 in July, and PHP 60.11 to USD 1 in April 2027.

More firms expected inflation to rise rather than decline in April, July, and April 2027. The inflation rate index was 68.9 percent for April, 57.5 percent for the next three months, and 22.2 percent for the next 12 months.

Inflation expectations stood at 4.2 percent for April, 4.4 percent for July, and 4.2 percent for April 2027, exceeding the BSP’s 4-percent tolerance ceiling.

Firms also expected peso borrowing rates to increase, with the peso borrowing rate index at 2.2 percent for April, 5.6 percent for the next three months, and 13.2 percent for the next 12 months.

The BSP said it continues to monitor the impact of the Middle East conflict on domestic prices and the broader economy and is ready to take necessary monetary action to prevent inflation expectations from moving away from the 3-percent target.

The April survey was conducted from April 7 to 30, 2026, covering 507 firms nationwide, including 193 companies in the National Capital Region and 314 firms outside the region across all 18 regions.

The nationwide response rate was 49.9 percent, down from 51.3 percent in March, with a sampling error margin of plus or minus 6.1 percentage points.

The BSP said the shift to a monthly Business Expectations Survey in January 2026 provides a more timely assessment of business confidence and allows the central bank to respond more promptly to changing domestic and international conditions.