Business confidence improves in Q2 – BSP

MANILA, Philippines — Companies in the Philippines have a more bullish outlook for the second quarter and the next 12 months amid expectations of higher consumer demand, uptick in business activities as well as easing inflation.

Meanwhile, consumers have turned less optimistic for the period as they anticipate faster inflation, fewer available jobs and less income, the Bangko Sentral ng Pilipinas (BSP) said.

Redentor Paolo Alegre Jr., senior director at the BSP’s Department of Economic Statistics, said that based on the results of the latest Business Expectations Survey (BES), the overall business confidence index for the second quarter rose to 48.1 percent from 38.2 percent.

This came amid expectations of higher demand for products and services, completion of more projects, seasonal uptick in business activities in the tourism and fisheries sub-sectors during the summer and open fishing seasons, development of new products and slower inflation.

In the first quarter, business sentiment weakened as the index declined to 33.1 percent from 35.9 percent in the previous quarter, mainly due to concerns over lesser demand for goods and services, slowdown in business activities, persistent inflationary pressures, stiff competition and the negative impact of El Niño.

Meanwhile, capacity utilization in the industry and construction sectors rose to 72.3 percent in the first quarter from 70.9 percent in the fourth quarter of 2023.

“Moreover, businesses, in general, may hire more workers while industry sector firms, in particular, may expand their product lines or production capacity for the second quarter and the next 12 months,” Alegre said.

The respondents of the survey conducted from Jan. 5 to March 12 are expecting a stronger peso as well as higher borrowing and inflation rates in the first half and in the near term.

Furthermore, businesses expected that inflation may breach the upper end of the government’s two to four percent target range for 2024 to 2026.

In particular, firms were expecting that inflation may settle at five percent in the first half of the year and for the next 12 months.

On the other hand, Alegre said consumer optimism weakened for the second quarter and the next 12 months, after turning less pessimistic in the first quarter.

Based on the BSP’s first quarter Consumer Expectations Survey, Alegre said the overall consumer confidence index of Filipinos slipped further to 2.7 percent from 5.6 percent for the second quarter.

The index also declined to 13.4 percent in the next 12 months from the previous survey result of 15 percent.

“The weaker outlook of consumers for both periods was attributed to their anticipation of faster increase in the prices of goods, fewer available jobs and lower income,” Alegre said.

According to Alegre, the outlook of Filipino consumers on the country’s economic condition, their family’s financial situation and family income was less favorable for the second quarter and the next 12 months.

BSP survey results also showed that 24.9 percent of households availed a loan in the last 12 months, higher than the 22.9 percent recorded in the fourth quarter last year.

Moreover, the percentage of households with savings increased to 33.5 percent in the first quarterfrom 29.1 percent a quarter prior.