Businesses under pressure to absorb costs to maintain competitive position

By Beatriz Marie D. Cruz, Senior Reporter

MARGIN compression is looming for Philippine companies as costs rise, along with the pressure to hold the line on pricing to remain competitive, industry associations said.

Management Association of the Philippines President Donald L. Lim said via Viber that rising costs have forced businesses to revisit their pricing, hiring, and operations.

“While some firms have begun adjusting prices, many are still absorbing costs to remain competitive, which is not sustainable if inflation remains elevated,” he said.

Headline inflation surged to a three-year high of 7.2% in April from 4.1% in March, as the fighting in the Middle East drove up the cost of food, transport, and utilities, the Philippine Statistics Authority reported on Tuesday.

In the first four months, inflation averaged 3.9%, nearly breaching the central bank’s 2%-4% full-year target.

The war caused fuel prices to stay elevated in April.

The Department of Energy (DoE) said on Monday that diesel prices are expected to increase by P2.66 per liter, with a P2.21 increase for gasoline. A rollback in kerosene prices has been capped at P3.53 per liter.

“The acceleration of inflation to 7.2% is already being felt across businesses, particularly through higher fuel, logistics, raw materials, and food-related costs,” Mr. Lim said. 

Semiconductor and Electronics Industries in the Philippines Foundation, Inc. (SEIPI) President Danilo C. Lachica said semiconductor and electronics firms are facing increased power, logistics and transportation costs due to the Middle East crisis.

“Nonetheless, we are maintaining our projection of 5% growth for the year, as there’s no disruption in supply chain and demand, just higher operating costs,” he said via Viber.

SEIPI is projecting 5% growth in electronic exports this year, driven by emerging technologies like artificial intelligence, data center construction, and the broader adoption of electric vehicles, and the internet of things.

The looming El Niño dry spell, which could dampen agricultural production, may also fan inflation in the coming months, Foundation for Economic Freedom President Calixto V. Chikiamco said.

“El Niño, escalating global food prices due to escalating costs of fertilizers, and continued conflict in the Middle East will also add to the pressures on prices,” he said via Viber.

A moderate to strong El Niño may occur by the fourth quarter and last until early 2027, according to the government weather service.

The European Chamber of Commerce of the Philippines noted that business activity has slowed as companies wait for energy prices to stabilize.

“That said, we are also seeing encouraging momentum in renewable energy and electric vehicle demand, which reinforces the case for the Philippines to accelerate its energy transition toward locally sourced green energy,” the group said in an e-mailed reply to questions.

At the end of 2025, renewable energy accounted for 25% of the Philippine power mix.

The DoE said it aims to increase the share of renewable energy in the country’s power generation mix to 35% by 2030 and 50% by 2040.

British Chamber of Commerce Philippines Executive Vice-Chairman Chris Nelson expressed support for the Department of Agriculture proposal to expand the minimum access volume for imported pork.

“There’s a need to bring in food supplies to ensure security and to keep prices as stable as possible,” he said via telephone.