Philippine corporate executives turned less pessimistic about the economic outlook last month, betting that a revival in consumer spending will shore up corporate earnings even as households grew increasingly anxious over job security and dwindling finances.

According to the Bangko Sentral ng Pilipinas’ (BSP) latest Business Expectations Survey released on Friday, June 26, the business confidence index for May rose to negative 25.2 percent from negative 35.8 percent in April.

“Philippine business sentiment improved in May on expectations that consumer spending will pick up to support corporate earnings,” the BSP said in a statement.

While the index remains in negative territory—indicating that pessimistic business owners still outnumber optimists—the rise signals a moderation of the gloom that characterized the previous month. This improved outlook was driven by firms’ expectations that stronger consumer demand will lift their earnings. Businesses were also hopeful that tensions in the Middle East would ease, resulting in lower fuel prices.

There is also a general expectation that investor confidence will recover over the near and medium term. The quarter-ahead index turned positive at 0.6 percent from negative 7.5 percent in April, while the one-year-ahead index increased to 27.8 percent from 19.5 percent.

Despite this overall rise in sentiment, caution remains regarding long-term growth. “The share of industry firms intending to expand operations declined amid continued uncertainty,” the BSP noted. However, firms intend to hire more workers over the next three to 12 months to support an expected increase in business activities.

Price pressures continue to be a concern for the business community, with inflation expectations settling above the BSP’s four percent tolerance ceiling for the year ahead.

Meanwhile, Filipino consumers have turned significantly more pessimistic about local economic conditions for the April-to-June period and markedly less optimistic for the year ahead, with their outlook weighed down by governance-related issues. Increased unemployment and a weaker Philippine peso were also among the main drivers of their waning optimism, according to the latest Consumer Expectations Survey (CES), released separately on Friday, June 26.

The CES revealed that the outlook for the remainder of the year has grown more guarded as households face weaker economic conditions and tighter finances. Data showed that the next-quarter confidence index (CI) shifted from 1.8 percent to negative 16.3 percent, while the year-ahead CI declined from 9.6 percent to 0.2 percent. Additionally, the confidence index for the current quarter plummeted from negative 15.8 percent to negative 42 percent.

“Aside from concerns over higher fuel and food prices, governance-related issues also weighed on consumer sentiment,” the BSP said.

While Filipino consumers expected higher spending on basic commodities, they were “less inclined” to buy big-ticket items like motor vehicles and real estate, the BSP noted. It added that borrowing and saving were weak, “reflecting a more guarded outlook on their finances.”

Households expect inflation to accelerate, with year-ahead expectations slightly exceeding the BSP’s 3 percent target but remaining within the four percent target ceiling.

This substantial decline in confidence is largely tied to the Middle East conflict, as households anticipate its impact on domestic prices and the broader economy—a situation the BSP said it continues to monitor closely. (Derco Rosal)