Businesses still optimistic despite inflation, rate hikes — BSP poll

MANILA, Philippines — Businesses were still bullish about their prospects despite headwinds that continue to test the Philippine economy, according to the Bangko Sentral ng Pilipinas. 

Results of a nationwide BSP survey of 1,554 firms released on Thursday showed the overall consumer confidence index (CI) rose to 34% in the first quarter, from 23.9% in the previous quarter.

Likewise, optimism in the second quarter soared to 49%, from 31.3% previously, while confidence for the next 12 months jumped to 61.9%, from 46.2% in the preceding survey round.

The overwhelming optimism was not surprising as the domestic economy managed to grow in 2022 despite roiling headwinds. Rising inflation fueled by supply chain bottlenecks, expensive fuel prices, and a weak peso, sapped the public’s purchasing power, but consumer spending rebounded as the economy fully reopened in the past year. 

Companies attributed their optimism to new opportunities in the healthcare, manufacturing, and construction sectors, survey results showed.

Nicholas Antonio Mapa, senior economist at ING Bank in Manila, found some caveats in the latest survey. As it is, the BSP has increased its key policy rate to 6.25% in a bid to contain surging inflation. 

READ: What the BSP's rate hike means for you

“Businesses, however, remain wary about higher inflation and borrowing costs but so far it appears that faster growth prospects have overtaken anxiety over faster price increases and rising borrowing costs,” he said in a Viber message. 

Central banks, like the BSP, use rate hikes to rein in demand pressures that are stoking price growth. The higher interest rates work by prompting consumers and businesses to think twice about borrowing money. This, in turn, lessens the money that’s circulating in the economy and chasing a limited supply of consumer items. — Ramon Royandoyan