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State spending on infrastructure slumped in April due to the election ban on disbursements for public works projects, the Department of Budget and Management (DBM) said.

In its latest disbursement report on Tuesday, the DBM reported that spending on infrastructure and other capital outlays declined by 27.8% to PHP 85.8 billion in April from PHP 118.9 billion in the same month last year.

“This was due mostly to the muted infrastructure spending of the Department of Public Works and Highways (DPWH), resulting from election-related prohibition on public spending for specific activities, goods, or services, as well as lower volume of contractor billings,” the DBM said.

Government agencies likely frontloaded and accelerated the implementation of infrastructure projects earlier this year, the DBM said.

The Commission on Elections implemented a 45-day ban on the release, disbursement or expenditures of public funds from March 28 to May 11.

The elections were held on May 12.

The DBM also attributed the decline in infrastructure spending to lower direct payments for foreign-assisted rail projects of the Department of Transportation, as well as the releases for local counterpart funds.

These rail projects include the South Commuter Railway Project and the Metro Manila Subway Project.

For the first four months of the year, infrastructure spending rose by 3.6% to PHP 347.6 billion from PHP 335.7 billion in the same period in 2024.

The DBM attributed the increase in infrastructure spending to the “robust spending performance of the DPWH for the implementation of various infrastructure projects, right-of-way settlements, and payment of progress billings (i.e., partially completed works) and accounts payables.”

Meanwhile, overall infrastructure disbursements inched up by 2.4% to PHP 419.4 billion in the January-to-April period from PHP 409.7 billion a year ago.

This includes infrastructure components of subsidy/equity to government corporations and transfers to local government units.

Analysts said infrastructure spending will likely pick up in the next few months.

“We may expect infrastructure spending to continue ramping up to boost the economy both through higher spending and employment in the construction sector, but also better economic activity comes with better infrastructure,” Oikonomia Advisory & Research, Inc. economist Reinielle Matt M. Erece said.

Budget Secretary Amenah F. Pangandaman earlier said infrastructure-related disbursements would likely increase after the election ban ended.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said government spending, particularly on infrastructure, would be a major contributor to overall economic growth.

“Infrastructure spending has been prioritized and increased in recent years to 5%-6% of GDP (gross domestic product), much higher vs. below 2% of GDP about 20-30 years ago,” he said in a Viber message.

For this year, the government’s infrastructure program is set at PHP 1.538 trillion, equivalent to 5.4% of total output.

The Development Budget Coordination Committee earlier said infrastructure spending will be sustained at 5-6% of GDP annually. — Aubrey Rose A. Inosante, Reporter

The government is still planning to source additional borrowings from the domestic market to fund the ballooning budget deficit.

“We’re still finalizing the details of our borrowing program, but we’re still targeting the 80-20 [local to foreign] funding split,” National Treasurer Sharon P. Almanza said in a Viber message.

The government is looking to hike its borrowing program to PHP 2.6 trillion this year from PHP 2.55 trillion previously, to fund the ballooning budget deficit.

The Development Budget Coordination Committee (DBCC) last week raised the budget deficit ceiling for 2025 to P1.561 trillion or 5.5% of gross domestic product (GDP) from 5.3% previously.

The DBCC had lowered this year’s revenue collection target to PHP 4.52 trillion from PHP 4.64 trillion previously. It trimmed the expenditure program for this year to PHP 6.08 trillion from PHP 6.18 trillion previously.

Asked where the government will source the additional borrowing requirements for this year, Finance Secretary Ralph G. Recto said in a text message: “Domestically.”

Gross borrowings by the National Government fell by 6.67% to PHP 1.33 trillion in the first five months of the year as both domestic and external borrowings declined.

External borrowings slumped by 21.54% to PHP 305.94 billion during the period, while domestic borrowings fell by 12.74% to PHP 1.02 trillion.

Reyes Tacandong & Co. Senior Adviser Jonathan L. Ravelas said the move to raise this year’s borrowing plan reflects the government’s need to fund its wider budget deficit.

“There’s definitely room for large issuances, especially retail Treasury bonds, which have historically been effective in tapping domestic liquidity and broadening investor participation. However, market volatility — driven by global uncertainties and shifting interest rate expectations — could affect pricing and demand,” Mr. Ravelas said.

A trader said in a text message that yields for the coming auctions of government securities are not expected to drop drastically as the increase in the government’s borrowing program is expected.

The trader added the government will have to issue a large volume, possibly through retail bonds, to meet the higher borrowing target.

“There is still space for large retail bond offerings, especially with strong demand from local investors seeking safe returns in a moderating interest rate environment,” Philippine Institute for Development Studies Senior Research Fellow John Paolo R. Rivera likewise said in a Viber message.

Regina Capital Development Corp. Head of Sales Luis A. Limlingan said in a Viber message that there was still space for large retail issuances amid “ample” liquidity, but market volatility could push yields higher.

Mr. Rivera also said market volatility stemming from global rate uncertainty, geopolitical tensions, and inflation risks could affect pricing and dampen investor appetite.

“The BTr (Bureau of the Treasury)will need to be strategic with timing, tenor, and incentives to manage costs and ensure successful take-up,” he said.

Mr. Rivera added the BTr could still tap into the foreign bond market as a “mix of strategies” could be used to meet the borrowing requirement.

BTr’s Ms. Almanza previously said the government is unlikely to issue another global bond this year as its foreign borrowing program is almost completed.

In January, the government raised USD 3.29 billion from its sale of US dollar and euro bonds.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message that “large” maturing Treasury bonds from August 2025-September 2025 will also drive the government to increase borrowings.

The government is looking to raise PHP 690 billion from the domestic market in the third quarter or PHP 325 billion via Treasury bills and PHP 365 billion through Treasury bonds. — Aaron Michael C. Sy

Minimum wage earners in Metro Manila are getting a PHP 50 daily wage increase — the highest pay hike ever granted by the National Wages and Productivity Commission — starting July 18, the labor department said on Monday.

The raise would benefit about 1.2 million workers in the Philippine capital and nearby cities and provinces, the Department of Labor and Employment (DoLE) said in a statement.

The new daily minimum wage in the National Capital Region (NCR) is expected to increase to PHP 695 from PHP 645 for the non-agriculture sector.

For workers in the agriculture sector, and service and retail establishments employing 15 or less workers, daily wages will be raised to PHP 658 from PHP 608.

Laborers working in manufacturing establishments employing less than 10 workers will also receive a daily wage of PHP 658.

The daily pay hike is equivalent to a PHP 1,100 per month increase for a five-day work week or a PHP 1,300 increase for those working six days a week, DoLE said.

It will take effect on July 18, a year after the last daily wage hike was implemented on July 17, 2024.

The DoLE added that the NCR wage board had considered the country’s latest gross domestic product (GDP), inflation rate, and unemployment rate in approving the wage increase.

In the first quarter, GDP grew by a weaker-than-expected 5.4%, sharply slowing from the 5.9% expansion in the same quarter last year but faster than 5.3% in the fourth quarter.

Inflation averaged 1.9% in the January-to-May period, slightly below the central bank’s 2-4% target range.

The unemployment rate averaged 4% in the January-to-April period, unchanged from the same period in 2024.

The DoLE said about 1.7 million full-time wage and salary workers that earn above minimum wage “may also indirectly benefit as a result of upward adjustments at the enterprise level arising from the correction of wage distortion.”

It added that retail and service establishments with not more than 10 workers and enterprises affected by natural calamities or disasters can apply for exemption from the wage increase.

On the other hand, barangay micro business enterprises in NCR are not covered by the latest wage order.

“The issuance of the new wage order is in line with the standing directive of President Ferdinand R. Marcos, Jr. for the timely and regular review of regional minimum wage rates to reduce uncertainty, enhance fairness for all stakeholders, and foster a stronger link between productivity and wages,” Labor Secretary Bienvenido E. Laguesma said.

Mr. Laguesma said that the DoLE will conduct an information campaign to ensure public awareness and closely monitor compliance by enterprises.

The NCR wage board was the first to issue a wage order this year. Public consultations on a new wage order for Regions I, II, III, IV-A and VII will be conducted between July and August.

Sought for comment, Employers Confederation of the Philippines (ECoP) President Sergio Ortiz-Luis, Jr. said that micro and small businesses in the capital region may struggle to implement the pay increase.

“Most of the employees (in the NCR) come from microbusinesses. Micro establishments will have a hard time with this. At the present rate, they are having trouble paying their employees, especially during Christmas when there is 13^th month pay,” Mr. Ortiz-Luis said in a phone call.

Philippine Chamber of Commerce and Industry (PCCI) Chairman George T. Barcelon said that the wage hike is expected to raise operating expenses for businesses and may be passed on to consumers.

“The costs of doing business will be higher and it will be passed on to consumers. For (businesses affected by) weak markets, their profit will be lower, and for companies already facing difficulties, they will incur more losses,” Mr. Barcelon said in a Viber message.

For her part, PCCI President Enunina V. Mangio said local businesses will comply but will have to find ways to lessen the impact of the approved minimum wage hike.

Leonardo A. Lanzona, Jr., economics professor at Ateneo de Manila University, said that the mandated wage increase may affect smaller firms and stoke inflation.

“The issue, however, is that this can cause inflation as aggregate demand is raised without increasing aggregate supply. Inflation may now be low, but any upward pressure can cause a spiraling effect on wages and prices,” Mr. Lanzona said via Messenger chat.

He said that any increase in wages should be an incentive for workers to be more productive.

“The government should mandate firms to create mechanisms that share their gains or savings with the workers in the form of bonuses, merit increases, and productivity payments. Wages, in effect, can be allowed to increase only if the workers are contributing to productivity,” Mr. Lanzona said.

Benjamin B. Velasco, assistant professor at the UP Diliman School of Labor and Industrial Relations, said the wage hike order will be a “welcome relief” for workers.

“It will nudge employers paying below the minimum to add something to the wages they pay. Workers receiving above the minimum can file for wage distortion,” he said via Facebook chat.

Federation of Free Workers President Jose Sonny G. Matula said in Filipino that the P50 wage hike is “not enough,” adding that workers would prefer a legislated wage hike.

Congress adjourned last month without approving the bill seeking to hike the minimum daily wage by P100-P200. Economic managers had warned that the proposed legislated wage hike may have “dangerous repercussions” on the Philippine economy.

“Estimates show that the across-the-board wage hike will exert substantial downward pressure on GDP by 1.6 ppts (percentage points) for a PHP 200 hike and 0.5 ppt for a hike of PHP 100. Both scenarios are predicted to result in the economy missing the lower end of the GDP growth target range,” the economic managers said last month. — Adrian H. Halili

Headline inflation likely settled below the 2-4% target band in June, as rising prices of fuel and some food items may have been tempered by lower cost of rice and electricity, the Bangko Sentral ng Pilipinas (BSP) said on Monday.

In a statement, the central bank said inflation may have settled within the 1.1%-1.9% range in June.

If realized, the BSP’s forecast would be much slower than the 3.7% inflation print in June 2024.

At the upper end of the BSP forecast, inflation likely picked up from 1.3% in May.

On the other hand, the low end of the forecast showed June inflation may have been the slowest in 57 months or since the 0.6% seen in October 2019.

A BusinessWorld poll of 17 analysts conducted last week yielded a median estimate of 1.5% for the June consumer price index (CPI).

June inflation data will be released on Friday (July 4).

“Upward price pressures for (June) are likely to be driven by higher meat and vegetable prices, elevated oil prices, and the depreciation of the peso,” the BSP said in a statement.

In June, pump price adjustments stood at a net increase of PHP 6.30 a liter for gasoline, PHP 8.25 a liter for diesel and PHP 6.50 a liter for kerosene.

The peso closed at PHP 56.33 per dollar at the end of June, depreciating by 58.5 centavos from the PHP 55.745 finish at end-May.

“These pressures, however, could be partially offset by lower prices of rice, fish, and fruits, as well as lower electricity rates,” the central bank said.

Manila Electric Co. (Meralco) cut the overall rate by PHP 0.1076 per kilowatt-hour (kWh) to PHP 12.1552 per kWh in June from PHP 12.2628 per kWh in May.

The BSP noted the drop in rice prices in June, which marked the fourth straight month of decline this year.

The Philippine Statistics Authority said prices of rice declined further with regular milled rice averaging PHP 42.77 per kilo in June from the PHP 43.32 per kilo in mid-May.

“Going forward, the BSP remains committed to safeguarding price stability by ensuring that monetary policy settings are conducive to sustainable economic growth and employment,” it said.

At its June 19 meeting, the central bank delivered a second straight 25-basis-point (bp) cut, bringing its policy rate to 5.25% amid a benign inflation outlook and slowing economic growth.

BSP Governor Eli M. Remolona, Jr. also signaled they could deliver one more 25-bp cut this year.

Meanwhile, analysts said non-rice food commodities likely contributed to slightly faster June inflation.

“I forecast inflation to be at 1.5% this June. Driven by higher oil prices as well as some food items such as livestock, fish, and some vegetable items. However, this was partly offset by lower electricity prices,”Oikonomia Advisory and Research, Inc. economist Reinielle Matt M. Erece said.

Meanwhile, Security Bank Corp. Vice-President and Research Division Head Angelo B. Taningco said prices of meat, fish, fruits, housing rentals, and electricity costs are some of the factors that drove up consumer prices in June.

The PSA reported that retail price of dressed chicken further rose to PHP 214.49 per kilogram in the first half of June from PHP 212.52 in the second half of May.

“[This] was somewhat offset by deflationary pressures from rice,” Mr. Taningco said.

The BSP last month lowered its baseline forecast for inflation to 1.6% for this year from 2.4%. It also expects inflation to settle at 3.4% for 2026 and 3.3% for 2027. — Aubrey Rose A. Inosante, Reporter

The Bangko Sentral ng Pilipinas (BSP) revised its balance of payments (BoP) forecasts for this year and 2026 amid heightened global uncertainty.

In a statement, the BSP said the overall BoP position is projected to end 2025 at a USD 6.3-billion deficit or -1.3% of gross domestic product (GDP), wider than the previous forecast of a USD 4-billion deficit or -0.8% of GDP.

For 2026, the central bank expects the BoP deficit to shrink to USD 2.8 billion or -0.5% of GDP from the previous projection of USD 4.3 billion or -0.8% of GDP.

“This outlook reflects a continued current account shortfall and moderating financial flows. While the domestic economy benefits from steady growth, low inflation, and ongoing structural reforms, these are offset by global trade uncertainty, heightened geopolitical risks, and weakened investor confidence,” the BSP said.

Latest BSP data showed the country’s BoP stood at a USD 5.8-billion deficit in the January-to-May period, a reversal from a USD 1.6-billion surplus in January to May 2024.

Meanwhile, the BSP also adjusted the forecasts for the country’s current account for this year and 2026.

This year’s current account deficit is now expected to narrow to USD 16.3 billion or -3.3% of GDP, a downgrade from the previous projection of a USD 19.8-billion deficit or -3.9% of GDP.

For 2026, the current account deficit is projected to further shrink to USD 13.6 billion or -2.5% of GDP, smaller than the previously projected USD 21.2 billion or -3.9% of GDP.

“The current account is expected to remain in deficit at around 3% of GDP, indicating a gap in savings over investment amid global uncertainties. As a result, external financing remains necessary to support the country’s infrastructure-led, investment-driven growth strategy,” the BSP said.

The BSP now expects goods exports to contract by 1% this year from the previous forecast of 1% growth. Goods exports are projected to grow by 2% in 2026.

“Goods exports continue to face headwinds from global trade uncertainty, lagging competitiveness, and constraints in the semiconductor industry,” the central bank said.

The BSP also trimmed the goods imports forecast to 1% this year from 4% previously. For 2026, goods imports are projected to grow by 2% from 4% previously.

“Meanwhile, stable domestic demand and infrastructure spending support the growth in imports, but import value is tempered by declining global commodity prices, particularly, for oil,” it said.

Services trade “remains broadly resilient” but the central bank warned that downside risks persist.

The BSP trimmed the growth forecast for services exports to 6% this year from 8% previously. It retained the 8% services exports growth projection for 2026.

The 5% growth forecast for business process outsourcing (BPO) receipts was retained for this year and for 2026.

“Outsourcing revenues are supported by stable demand for contact center services, yet they confront uncertainties due to US job reshoring initiatives and local talent shortages,” the BSP said.

Tourism receipts are projected to grow by 10% this year from 11% previously. For 2026, tourism receipts are expected to expand by 11% from 12% previously.

On the other hand, the BSP also trimmed its services imports growth forecast to 6% this year from 14% previously. It also lowered the growth projection for next year to 7% from 12% previously.

The central bank kept its cash remittance growth projection to 2.8% this year and 3% for 2026.

“Steady remittance flows continue to provide a buffer against trade deficit, supported by strong labor demand for Filipino workers in key sectors as well as by the aging populations in host countries,” the BSP said.

However, emerging protectionist policies in some host countries present emerging risks, it added.

Meanwhile, the BSP said foreign investment inflows are expected to “remain positive but subdued as policy uncertainty and the global slowdown weigh on investor sentiment.”

Financial account outflows could reach USD 13 billion this year, lower than the earlier forecast of USD 16.2 billion. For 2026, the outflows are seen to reach USD 13.2 billion, smaller than the previous projection of USD 17.8 billion.

The BSP now expects foreign direct investments (FDI) to end the year at a net inflow of USD 7.5 billion, smaller than the USD 9-billion projection in March. For 2026, FDI net inflows are expected to hit USD 8 billion, lower than the previous projection of USD 9 billion.

Meanwhile, foreign portfolio investments (FPI) are expected to end at a USD 6.8-billion net inflow this year, higher than the USD 3.9-billion earlier forecast.

For 2026, net inflows of foreign portfolio investments are expected to reach USD 5 billion, lower than the USD 4.1-billion previous projection.

“The moderation in trade and investment flows limits the country’s scope to build up foreign exchange reserves. Nonetheless, reserves are expected to remain ample, providing sufficient liquidity to cushion the economy against external headwinds,” the BSP said.

The central bank also lowered its 2025 gross international reserves (GIR) forecast to USD 104 billion from USD 105 billion previously. It kept the GIR forecast at USD 105 billion for 2026.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the weaker BoP outlook can be attributed to a global economic slowdown due to the US tariff policy and geopolitical risks.

“These external risk factors could also slow down the growth in the country’s structural US dollar inflows such as OFW (overseas Filipino worker) remittances, BPO revenues, foreign tourism receipts,” he said in a Viber message.

Mr. Ricafort said these external challenges may result in slower global investments, exports, employment, increased volatility in global crude oil and other global commodity prices. — Aubrey Rose A. Inosante

Headline inflation may have slightly picked up in June as stable food prices helped offset the spike in fuel prices, analysts said.

A BusinessWorld poll of 17 analysts yielded a median estimate of 1.5% for June inflation, accelerating from the 1.3% in May but still below the Bangko Sentral ng Pilipinas’ (BSP) 2-4% target range.

If realized, this would be the fastest clip in three months or since the 1.8% in March. However, it would be slower than the 3.7% print in June 2024.

The Bangko Sentral ng Pilipinas (BSP) will release its month-ahead inflation forecast for June on Monday, June 30.

The June inflation data will be released by the Philippine Statistics Authority (PSA) on July 4.

Maybank Investment Banking Group Economics Research gave a June inflation forecast of 1.5%, citing a slower rise in food and power costs.

“Factors include sustained low inflation in key groups such as food and electricity which may offset some upside pressures from the increase in fuel cost in the last two weeks of the month due to rise in global fuel prices given the escalation in the Middle East conflict,” Maybank said.

Moody’s Analytics economist Sarah Tan, who expects inflation to have settled at 1.4% in June, said inflation in the food basket likely remained stable, “supported by a modest decline in rice prices.”

The PSA reported that rice prices declined further in June with regular milled rice averaging PHP 42.77 per kilo from the PHP 43.32 per kilo in mid-May.

“Our food-price tracker suggests that food inflation fell further — close to zero — but this should be offset fully by a temporary rebound in housing and utilities inflation to over 3%,” Pantheon Macroeconomics Chief Emerging Asia Economist Miguel Chanco said.

Aris D. Dacanay, an economist for ASEAN at HSBC Global Research, noted that electricity rates in Metro Manila declined by 0.9% month on month in June due to lower generation charges.

Manila Electric Co. (Meralco) cut the overall rate by P0.1076 per kilowatt-hour (kWh) to PHP 12.1552 per kWh in June from PHP 12.2628 per kWh in the previous month. Generation charges fell by 0.9% to PHP 7.3552 per kilowatt-hour (kWh) from May.

“We expect June inflation to settle at 1.6% yoy (year on year), up roughly 0.2% from the previous month. Electricity prices as well as cost of select non-rice food items delivered upside pressure to inflation,” Nicholas Antonio T. Mapa, chief economist at Metropolitan Bank & Trust Co., said.

Chinabank Research said inflation likely quickened due to higher pump prices, as well as rising costs of meat, vegetables, and education-related expenses at the start of the new school year.

Fuel price spike

Ms. Tan said the spike in fuel prices triggered by the conflict in the Middle East may have put upward pressure on the utilities basket.

In June, pump price adjustments stood at a net increase of PHP 6.3 a liter for gasoline, PHP 8.25 a liter for diesel and PHP 6.5 a liter for kerosene.

“Retail gas prices surged 3% day-to-day on June 17 as a reaction to rising tensions between Iran and Israel, only to have slightly moderated in the tail-end of the month when tensions de-escalated,” Mr. Dacanay said.

Reuters on Friday reported that oil prices were set for their steepest weekly decline since March 2023, as the absence of significant supply disruption from the Iran-Israel conflict saw any risk premium evaporate.

“While global oil prices have eased following the ceasefire between Israel and Iran, the risk of renewed conflict remains and could drive prices higher again. Still, inflationary pressures may be tempered by declining rice prices,” Chinabank Research said.

ING Philippines said the increase in domestic pump prices “should be temporary” with prices expected to decline in July.

Rate cut outlook

Bank of the Philippine Islands Lead Economist Emilio S. Neri, Jr. said inflation may start accelerating by September as “favorable base from rice will fade by then.”

“Headline prints will likely remain within BSP target which could allow them to cut once more before the end of 2025,” Mr. Neri said.

The Monetary Board delivered a second straight 25-basis-point (bp) cut at its June 19 meeting, bringing its policy rate to 5.25% amid a benign inflation outlook and slowing economic growth.

BSP Governor Eli M. Remolona, Jr. also signaled they could deliver one more 25-bp cut this year.

The BSP slashed its inflation forecast to 1.6% for this year from 2.4%. It also expects inflation to settle at 3.4% for 2026 and 3.3% for 2027.

Security Bank Corp. Vice-President and Research Division Head Angelo B. Taningco said he expects inflation to be contained for the rest of the year, with his full-year forecast at 1.9%.

“Upside risks to our inflation outlook include global oil price shock triggered by resurgence of Israel-Iran conflict. We still expect a manageable inflation environment and another quarter-point policy rate cut by the BSP before the year ends,” Mr. Taningco said.

Ruben Carlo O. Asuncion, chief economist at Union Bank of the Philippines (UnionBank), said he expects inflation to gradually rise to 2% by September and to end the year at 2.5%.

“We anticipate the BSP will continue its policy easing cycle, likely delivering a final 25-bp rate cut in October. This move would allow the central bank to assess the cumulative impact of its earlier rate adjustments while maintaining a supportive stance for growth,” Mr. Asuncion said.

Ms. Tan said the conflict in the Middle East could lead to sustained elevated global oil prices, which may mean higher domestic fuel and utility costs.

The Philippines, a net oil importer, is particularly vulnerable to global oil prices.

“Should these risks materialize, they could constrain the BSP’s scope for further policy easing, particularly if second-round effects begin to build. That said, in the absence of persistent supply shocks, inflation should stay within target,” Ms. Tan said.

For the full year, Moody’s inflation forecast stood at 2.2%.

For his part, Mr. Chanco said he sees ample room and an “urgent need” for two additional 25-bp rate cuts.

The Monetary Board’s remaining policy meetings this year are scheduled for Aug. 28, Oct. 9, and Dec. 11. — Aubrey Rose A. Inosante

Business sentiment  in the Philippines turned less upbeat in the second quarter amid concerns over the impact of the Trump administration’s tariff policy on the economy, a survey by the Bangko Sentral ng Pilipinas (BSP) showed.

The latest BSP Business Expectations Survey showed the overall confidence index (CI) for businesses declined to 28.8% in the second quarter from 31.2% in the first quarter, and from 32.1% a year ago. 

This was the lowest recorded CI since the 23.9% logged in the fourth quarter of 2022. It also marked the second quarter in a row that the index declined since the 44.5% CI in the fourth quarter of 2024.

The survey was conducted from April 4 to May 19, covering 1,527 firms nationwide.

A positive CI indicates that more respondents are optimistic than pessimistic.

“Philippine businesses were cautiously optimistic about the economy in the second quarter of the year. They were primarily concerned about the potential impact of reciprocal tariffs on Philippine exports to the United States and uncertainty over their implementation,” the BSP said in a report.

In April, US President Donald J. Trump announced a baseline 10% tariff on all its trading partners, as well as higher reciprocal tariffs on some countries. The Philippines was slapped with a 17% tariff, the second lowest among Southeast Asian countries.

While the reciprocal tariffs have been paused for 90 days until July 9, the baseline 10% tariff remains in place.

“The expected slowdown in business activity after the May midterm elections and the sugar off-milling season also weighed on business confidence,” the BSP said.

Businesses turned less optimistic for the third quarter, with the CI falling to 39.3% from 45.4% in the previous survey. This was the lowest since 38.2% in the fourth quarter of 2023.

For the next 12 months, firms were less upbeat, with the CI dropping to 51% from 56.4% in the previous quarter.

The BSP said businesses cited “expectations of fewer clients and orders due to expiring contracts and softer market conditions as a reason for their more cautious year-ahead economic outlook.”

Survey respondents expect the peso to appreciate against the dollar over the next 12 months but see an uptick in inflation.

Firms expect the peso to average PHP 57.09 per dollar in the second quarter, PHP 57.12 in the next quarter, and PHP 57.14 for the next 12 months.

Firms also see inflation averaging 2.8% in the second quarter, 2.9% next quarter, and 3% for the next 12 months.

Consumer outlook

Meanwhile, Filipino consumers were more pessimistic in the second quarter but turned positive in their outlook for the third quarter, according to the BSP’s latest Consumer Expectations Survey (CES).

The survey showed the CI in the second quarter fell to -14% from -13% in the previous quarter, as consumers cited “higher inflation, lower family income, and fewer job opportunities” as the reasons for the downbeat sentiment. 

A negative CI means more respondents are pessimistic than optimistic.

For the third quarter, the CI turned positive at 0.6% from -0.5% in the previous survey.

Consumer sentiment for the next 12 months dipped to 11.8% from the 12.4% in the previous survey.

Filipino consumers attributed the positive outlook to higher household income, more jobs and moderating inflation.

“Households expect that the inflation rate may increase in mid-2025 and over the next 12 months. However, inflation expectations are expected to ease during this period as the corresponding inflation rate diffusion indices declined from their Q1 2025 levels,” the BSP said.

Consumers expect inflation to average 3.7% in the next 12 months, a tad lower than the 3.8% in the previous survey.

For the second quarter CES, the BSP surveyed 5,444 households from April 2 to 15. — A.M.C.Sy