Philippine business sentiment collapsed in March as the threat of an escalating Middle East conflict stoked fears that surging fuel costs would derail consumer spending and ignite fresh inflationary pressures.
Based o n the Bangko Sentral ng Pilipinas’ (BSP) monthly Business Expectations Survey (BES), the confidence index (CI) cratered to -24.3 percent, a violent swing from the 8.2 percent optimism recorded in February.
A negative CI indicates that pessimists now outweigh optimists among the nation’s business leaders.
The gloom deepened in the near-term outlook, with the quarter-ahead CI diving to -17.3 percent from 37.4 percent in the previous survey.
While the 12-month outlook remained technically positive, it withered to 11.7 percent from 51.1 percent, battered by “uncertainty over heightened geopolitical tensions in the Middle East and persistent inflationary pressures.”
The pivot in sentiment is already hitting the labor market. The BSP noted that “hiring intentions for the quarter- and year-ahead became less favorable, pointing to subdued employment growth in the coming months.”
However, a segment of the real economy remains in motion due to previous commitments. “A higher share of industry firms reported expansion plans, reflecting investments already in place prior to the Middle East conflict,” the central bank said.
Inflation remains the primary concern for the private sector. Businesses expect price growth to settle “above the BSP’s 3.0-percent target but within the ±1.0 percentage-point tolerance band.”
The BSP signaled a hawkish readiness to protect the domestic economy from an oil-driven shock.
“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 bank said.
To buffer the impact, the central bank has already “issued regulatory measures to enable banks to assist affected clients.”
The shift to a monthly survey format is intended to allow the BSP to “respond more proactively to evolving domestic and international conditions.”
