Pessimism among businesses intensified in April as rapidly rising inflation, higher oil prices, and economic uncertainty stemming from the Middle East conflict continued to cloud an already fragile Philippine economic outlook.

In its latest Business Expectations Survey, the Bangko Sentral ng Pilipinas (BSP) reported that the overall business confidence index (CI) fell further to -35.8 percent in April from -24.3 percent in March.

“This was driven by concerns that higher inflation could raise firms’ operating costs and erode households’ purchasing power,” the central bank said.

A negative CI indicates that more respondents are pessimistic than optimistic about the economy, underscoring persistent business concerns amid the ongoing energy shock.

Business confidence had already remained subdued at the start of the year as lingering concerns over the flood control scandal continued to weigh on sentiment. Although confidence posted a modest rebound in February, the onset of the Middle East conflict caused the CI to plunge to -24.3 percent in March, a 32.5-percentage-point decline.

April saw the first- and second-round effects of the global oil shock spread further across the domestic economy. Headline inflation accelerated to a three-year high of 7.2 percent, driven largely by triple-digit fuel prices that pushed up transportation costs, while higher food and fertilizer prices also reflected the broader impact of the conflict.

The same month, the BSP became one of the first central banks in the region to raise interest rates in response to the energy shock. It also rolled out relief measures aimed at protecting borrowers and financial institutions from the broader effects of the national energy emergency.

The BSP said on Friday that businesses also expect inflation to remain elevated, with average 12-month-ahead inflation expectations exceeding the central bank’s 4.0-percent upper tolerance threshold.

Despite the weak current sentiment, the central bank said businesses were more optimistic about the future. The three-month-ahead CI improved to -7.5 percent from -17.3 percent, while the 12-month-ahead CI rose to 19.5 percent from 11.7 percent.

The BSP attributed the improved outlook to expectations of stronger demand, higher sales and income, better economic conditions, and the possibility of a resolution to the Middle East conflict in the coming months.

“The outlook improved on expectations of stronger demand, higher sales and income, better economic conditions, and a possible resolution of the Middle East conflict,” the BSP said.

The end of April also saw the release of first-quarter economic growth data, which showed gross domestic product expanding by just 2.8 percent. Government officials attributed the slowdown to the combined effects of the energy crisis and lingering fallout from the flood control scandal.

Analysts have projected that the BSP may likely be forced to implement additional rate hikes this year in response to rising inflation, a move that could further weigh on economic growth and business sentiment.

Government officials have reiterated that restoring investor confidence through reforms focused on governance, ease of doing business, and greater resilience against external shocks remains critical to putting economic growth back on track.