Businesses more optimistic for Q2

MANILA, Philippines — Businesses in the Philippines turned more optimistic for the second quarter as confidence levels improved while optimism for the next 12 months remained steady, according to the Bangko Sentral ng Pilipinas.

Based on the BSP’s fourth quarter Business Expectations Survey (BES), the overall confidence index (CI) increased to 45.4 percent for the second quarter from 40.3 percent in the previous survey.

The improved sentiment was driven by expectations of higher demand for products and services due to the upcoming elections, a seasonal uptick in business activities, continued favorable economic conditions and planned business expansions.

For the next 12 months, optimism remained buoyant, with the overall CI holding steady at 56.4 percent – unchanged from the previous survey. 

The positive outlook was attributed to election-related spending, increased economic activity during the summer season, a stable economic environment and expansion plans. 

However, business sentiment was less optimistic in the first quarter, with the overall CI dropping to 31.2 percent from 44.5 percent in the fourth quarter of 2024.

The less upbeat outlook was mainly attributed to a post-holiday decline in demand and business activities, as well as concerns over a potential resurgence of inflationary pressures.

 Across sectors, business sentiment for the first quarter was generally less optimistic, except for the construction sector, which remained stable.

Trading firms also exhibited weaker confidence, with exporters, dual-activity firms (importers and exporters) as well as domestic-oriented businesses reporting lower optimism, while importers’ sentiment remained unchanged.

Meanwhile, the average capacity utilization for the industry and construction sectors declined to 71.4 percent in the first quarter from 73.9 percent in the fourth quarter last year.

Firms also expect tighter financial conditions and limited credit access in the first quarter as businesses anticipate weaker cash flow and a more restrictive borrowing environment. 

Businesses also foresee a weaker peso and higher interest rates in the first half of 2025.

The peso is expected to depreciate against the dollar in the first and second quarters before appreciating over the next 12 months.

 Inflation expectations have also strengthened, with businesses projecting higher inflation in the next 12 months. The expected inflation rate averages 3.2 percent in the first quarter, 3.3 percent in the second quarter and 3.4 percent over the next 12 months.

 The survey was conducted from Jan. 8 to March 1, covering 1,527 firms nationwide.