BUSINESS sentiment fell in the second quarter, the Bangko Sentral ng Pilipinas (BSP) reported late on Friday, primarily due to worries over unilateral tariffs ordered by US President Donald Trump.
The overall confidence index (CI) in the BSP’s latest Business Expectations Survey dropped to 28.8 percent from 31.2 percent three months earlier.
The primary concern raised by survey respondents, the BSP said, “was the potential economic effects of a 17-percent reciprocal tariff on Philippine exports to the US.”
“Although the higher tariff rate has been paused for 90 days and reverted to 10 percent, businesses still view this as a sign of rising global trade uncertainty,” it added.
“Businesses also expect fewer clients and orders in Q2 2025 due to the expected slowdown in business activity after the May midterm elections and the sugar off-milling season,” the BSP continued.
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Sentiment was also lower with regard to the following quarter and the next 12 months, with the CIs for the two periods falling to 39.3 percent and 51.0 percent, respectively, from 45.4 percent and 56.4 percent.
For the third quarter, respondents cited global trade tensions that may be triggered by the US tariffs and also said that demand could drop due to the rainy season.
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The more cautious year-ahead outlook, meanwhile, was attributed to the above factors and “expectations of fewer clients and orders due to expiring contracts and softer market conditions…”
Second-quarter sentiment was more upbeat among construction (38.2 percent from 35.8 percent), but declined for services (31.7 percent from 35.9 percent), wholesale and retail (31.8 percent from 34.1 percent), and industry (17.9 percent from 18.3 percent) sectors.
Anticipated projects during the summer lifted the construction sector outlook, the BSP said.
For the wholesale and retail trade and services sectors, the lower optimism was said to be “primarily due to concerns over US tariffs.”
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“Additionally, weaker demand from rental contract expirations and client losses to competitors, further weighed on their sentiment,” the central bank added.
As for the next quarter, construction and services firms were less optimistic. The industry sector was more upbeat, meanwhile, while wholesale and retail trade sentiment was little changed.
Over the next 12 months, long-term confidence dipped in most sectors, with construction the exception.
Companies said that cash positions and credit access would remain tight in the second quarter while the hiring and expansion outlooks for the third quarter and the next 12 months remained positive but were lower compared to three months earlier.
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The peso is expected to strengthen against the dollar over all three periods, averaging P57.09:$1, P57.12 and P57.14, respectively, during the second quarter, third quarter and the next 12 months.
Inflation could rise due to election-related spending, US tariffs, fuel prices, agricultural losses due to bad weather and supply constraints, among other factors, but expectations remained within the government’s 2.0- to 4.0-percent target.
“Within-target inflation supports investments and job creation,” the BSP said.
