United States-imposed (US) reciprocal tariffs, a three-month pause of which is concluding 10 days from now, caused a decline in the confidence index of businesses in the second quarter of the year, while Filipino consumers’ confidence was deeply hurt by the insufficient income and fewer jobs available. 

As reported in the Bangko Sentral ng Pilipinas’ (BSP) survey on the expectations of businesses on the current period, business owners “were primarily concerned about the potential impact of reciprocal tariffs on Philippine exports to the United States and uncertainty over their implementation.

As such, the businesses were “cautiously optimistic” about the country’s economic performance in the April-to-June period. Results showed that the overall business confidence index dropped from 31.2 percent in the first quarter of 2025 to 28.8 percent in the second quarter.

“The expected slowdown in business activity after the May midterm elections and the sugar off-milling season also weighed on business confidence,” the report said. Prior to the elections season, economist were expecting growth to be bolstered by election-related activities. 

According to the latest Philippine Statistics Authority (PSA) report, the local economy expanded by 5.4 percent, a modest increase compared to the 5.3 percent growth seen in the previous quarter. But this was way slower than the 5.7-percent expansion seen in the same quarter a year ago.

The Department of Economy, Planning and Development (DEPDev) noted that pre-election-related activities were calculated in the second quarter of 2025.

Last week, the Cabinet-level Development Budget Coordination Committee (DBCC) decided to downscale the country’s gross domestic product (GDP) growth target, citing these uncertainties, especially the ongoing conflict between Israel and Iran. 

From six to 6.5 percent growth target range previously, the DBCC revised its projection downwards to 5.5 percent to 6.5 percent. National Socioeconomic Planner Arsenio Balisacan early said that this fresh, lower goal is comfortably within reach citing subdued inflation and the continued reduction of key borrowing costs since late last year. 

While business confidence moderated, its confidence index remained positive, reflecting that businesses are more optimistic than pessimistic. 

Filipino consumers became more pessimistic in the second quarter of the year, citing higher inflation, lower family income, and fewer job opportunities as the main reasons. This was not the case for Filipino consumers. 

Results of the latest consumer expectations survey (CES) showed that the overall consumer confidence index declined from -13 percent in the first quarter of 2025 to -14 percent in the second quarter. Consumers are more pessimistic than optimistic, as indicated by the negative index—which deepened even more. 

According to the BSP, this intensified optimism was caused by “higher inflation, lower family income, and fewer job opportunities as the main reasons.”

Despite the more downbeat sentiment for the current quarter, the consumer confidence index for both the next quarter and the next 12 months was positive, reflecting sustained consumer confidence in the near term.

Looking ahead, the consumer confidence for the succeeding quarter, through next year, was “positive” despite the “more downbeat sentiment” for the current quarter, the BSP said.

Meanwhile, business confidence continued to moderate to lower 39.3 and 51 percent for the next quarter and next year, respectively. Both indexes were lower quarter on quarter and year on year.

Both firms and consumers expect inflation to settle within the government’s two- to four-percent band—which the DBCC retained in its latest review. 

“Within-target inflation supports investments and job creation,” the BSP said.

Both surveys are BSP’s major economic surveillance tools. “Its results are important inputs to monetary policy formulation.” Latest interest rate cut was in June at 25 basis points (bps) to 5.25 percent from 5.5 percent previously.