Business confidence softens in 1st quarter

As firms turn cautious, consumers stay wary

MANILA, Philippines — Confidence in economic conditions for the first quarter of 2026 weakened as businesses turned more cautious and consumers remained wary, according to surveys conducted by the Bangko Sentral ng Pilipinas.

Based on the BSP’s latest Business Expectations Survey (BES), business confidence is expected to ease in the first quarter of 2026 as firms brace for a post-holiday slowdown in demand and lingering governance-related concerns.

Results of the fourth quarter 2025 BES showed the next-quarter confidence index falling sharply to 23.7 percent from 49.5 percent in the previous survey round, marking the lowest reading since the fourth quarter of 2020.

Firms attributed the weaker outlook for the first quarter of 2026 to expectations of a post-holiday decline in demand for products and services, the negative impact of corruption allegations on investor confidence, the depreciation of the peso and higher inflation.

Looking beyond the next quarter, firms were also less upbeat about the year ahead. The confidence index for the next 12 months declined to 40.4 percent from 48.1 percent in the previous survey.

Businesses attributed their more subdued outlook to governance-related concerns over public works spending, weaker demand for products and services, higher inflation, the peso’s depreciation and the possibility of an economic slowdown.

Despite the more cautious outlook, business sentiment improved in the current quarter. The overall current-quarter confidence index rose to 29.7 percent in the fourth quarter of 2025 from 23.2 percent in the third quarter, driven by a higher share of optimists.

Survey respondents cited higher consumer spending during the holiday season, business process enhancements, expansion plans and benign inflation as key factors behind the improved sentiment.

Across regions, business confidence in the fourth quarter improved in both the National Capital Region and areas outside the NCR, mirroring the nationwide trend. However, sentiment for the first quarter of 2026 and the next 12 months declined across all regions.

Meanwhile, consumer confidence weakened further in the fourth quarter of 2025, based on the BSP’s Consumer Expectations Survey (CES).

The overall current-quarter consumer confidence index fell deeper into negative territory at -22.2 percent from -9.8 percent in the previous quarter.

The BSP said the weaker sentiment was “mainly due to concerns over graft and corruption in the government, higher inflation, lower household income and unfavorable weather conditions and other natural calamities.”

For the first quarter of 2026, consumer sentiment remained positive but moderated. The next-quarter confidence index eased to 3.6 percent from 6.9 percent, while the year-ahead index slipped to 11.8 percent from 14.1 percent.

The BSP said the less buoyant outlook for both periods reflected the same concerns cited in the current quarter.

The fourth quarter 2025 BES was conducted from Oct. 7 to Nov. 13, covering 1,521 firms nationwide. A total of 870 firms responded, resulting in a response rate of 57.2 percent.

On the other hand, the fourth quarter 2025 CES was conducted from Oct. 1 to Oct. 13 and covered 5,489 households nationwide, representing a response rate of 98.9 percent.