BSP flags inflation risks, but firms more optimistic about July 2026
The Bangko Sentral ng Pilipinas (BSP) expects inflation to remain elevated in May while businesses continue to grapple with the economic fallout from the ongoing Middle East conflict.
In its latest month-ahead inflation forecast issued May 30, the BSP “projects May 2026 inflation to settle within the range of 7.1 to 7.9 percent. Upside price pressures were driven by rising prices for rice, vegetables, and meat, as well as the depreciation of the peso.”
“Meanwhile, the recent rollbacks in domestic fuel prices, lower prices for fish, and slightly lower electricity rates partially offset the prevailing upside price pressures,” the central bank said.
The inflation outlook comes as Philippine businesses remain cautious about the economy.
Results of the BSP’s April 2026 Business Expectations Survey (BES) showed that business sentiment turned more pessimistic for the second straight month, largely due to concerns that higher inflation could raise operating costs and reduce consumers’ purchasing power.
The survey found that the business confidence index fell to negative 35.8 percent in April from negative 24.3 percent in March. A negative reading means more firms are pessimistic than optimistic about economic conditions.
Many respondents cited the ongoing Middle East conflict as a major source of uncertainty, fearing that higher oil prices and inflation could further strain both businesses and households.
Despite the gloomy short-term outlook, companies were more optimistic about the months ahead.
“The economic outlook for July 2026 and April 2027 improved. The three-month-ahead confidence index (CI) increased from -17.3 percent to -7.5 percent, while the 12-month-ahead CI rose from 11.7 percent to 19.5 percent,” the bank said in a news release dated May 29.
“The outlook improved on expectations of stronger demand, higher sales and income, better economic conditions, and a possible resolution of the Middle East conflict,” it added.
The survey also showed generally favorable hiring plans over the next three months and the next year, suggesting continued support for employment. However, fewer industrial firms reported expansion plans amid elevated fuel prices and lingering uncertainty.
Firms likewise expect inflation to remain high over the next 12 months, with average inflation expectations staying above the BSP’s 4-percent upper tolerance limit.
“The BSP continues to closely monitor the impact of the ongoing Middle East conflict on domestic prices and the broader economy,” the central bank said.
It added that it “stands ready to take necessary monetary action to prevent de-anchoring of inflation expectations from the 3-percent target to protect households and businesses.”
The April 2026 BES surveyed 507 firms nationwide between April 7 and 30. The survey consisted of 193 companies in the National Capital Region (NCR) and 314 firms in areas outside the NCR, covering all 18 regions across the country.
According to the central bank, samples were drawn through stratified random sampling from the Bureau van Dijk (BvD) database of Top 7,000 Corporations based on total assets in 2017. The nationwide survey response rate for April 2026 was 49.9 percent with a sampling error margin of ±6.1 percent.
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