Businesses in the Philippines turned less optimistic in the second quarter of 2024, citing weaker demand, high oil prices, extreme weather and elevated inflation, a Bangko Sentral ng Pilipinas (BSP) survey showed.
The central bank’s overall confidence index (CI) dipped to 32.1 percent from 33.1 percent in the first quarter.
The BSP said the decline reflects a decrease in optimism and an increase in pessimism among respondents.
Rendento Paolo Alegre Jr. of the BSP’s Department of Economic Statistics attributed the weakened confidence to softer demand for goods and services, ongoing international conflicts that could push oil prices higher, El Niño and other extreme weather events, and persistent inflationary pressures that could dampen consumer spending.
Business confidence is expected to weaken further in the third quarter, with the overall CI projected to fall to 43.7 percent from 48.1 percent in first quarter.
The survey also indicated a less upbeat outlook for the next 12 months, with the overall CI declining to 56.5 percent from 60.8 percent in the first quarter.
The wholesale and retail trade sector showed a more positive outlook, with a CI of 37.2 percent compared to 32.2 percent in the previous quarter. Conversely, the construction and services sectors displayed lower confidence, with CIs of 35.2 percent and 39.7 percent respectively.
Trading firms, except for importers, had a generally less optimistic outlook. Importers’ confidence index rose to 33.3 percent from 31.4 percent in the first quarter.
Businesses anticipate a depreciation of the peso against the US dollar in the second and third quarters, but a possible appreciation in the next 12 months.
They also expect inflation and peso borrowing rates to rise in the second and third quarters, and over the next year. Respondents forecast an average inflation rate of 4.3 percent in second quarter, 4.4 percent in third quarter and 4.5 percent for the next 12 months, exceeding the government’s target range of 2 percent to 4 percent.