Philippine business sentiment collapsed into pessimistic territory in the first quarter as escalating Middle East tensions fueled fears of an energy price shock, according to the latest central bank data.

According to the latest Business Expectations Survey (BES) released by the Bangko Sentral ng Pilipinas (BSP), the business confidence index plummeted to -24.3 percent in March, a reversal of the 8.2 percent recorded in February.

A negative index indicates that pessimistic business owners now outnumber those with an optimistic outlook.

The outlook for the second quarter followed a similar downward trajectory, crashing to -17.3 percent from a previously optimistic 37.4 percent.

Companies cited the widening conflict in the Middle East as the primary catalyst for the gloom, fearing that prolonged volatility will drive fuel costs higher and erode the purchasing power of Filipino households.

While the broader outlook for the next 12 months remained technically positive, the index for the year ahead weakened significantly to 11.7 percent from 51.1 percent.

Firms cited heightened geopolitical tensions and persistent price pressures as reasons for their caution.

This shift in sentiment is already impacting the labor market, as hiring intentions for both the quarter- and year-ahead have become less favorable, pointing toward subdued employment growth in the near term.

A silver lining remains in the industrial sector, where some firms are proceeding with expansion plans. These, however, reflect investments that were already in place before the conflict erupted.

On prices, businesses expect inflation to accelerate, with expectations for the coming year settling above the BSP’s target.

To cushion from the impact of the external shocks, the BSP has also issued regulatory measures to help banks support affected clients.

Filipino consumers have likewise become less optimistic about local economic conditions in both the coming quarter and the year, with the outlook still marred by concerns tied to graft and corruption.

According to the latest Consumer Expectations Survey (CES), the outlook for the remainder of 2026 has become increasingly cautious as households weigh governance issues against their financial stability.

Data show that the quarter-ahead CI fell from 3.6 percent to 1.8 percent, while the year-ahead CI declined from 11.8 percent to 9.6 percent.

Beyond corruption, which may undermine the effective delivery of public services, consumers cited higher inflation as a primary driver of their waning optimism.

According to the BSP, the full impact of geopolitical tensions on consumer confidence and inflation expectations has yet to be captured and is expected to surface in subsequent survey rounds. (Derco Rosal)