Business optimism dips for year ahead

BSP survey shows

MANILA, Philippines — Philippine businesses turned less optimistic about economic prospects over the next quarter and the year ahead as elevated prices, geopolitical tensions and a weaker peso continued to weigh on sentiment, according to the Bangko Sentral ng Pilipinas (BSP).

Results of the BSP’s latest Business Expectations Survey (BES) showed that the confidence index (CI) for the next three months declined to 20.9 percent in September from 24.6 percent in August.

The index measures the difference between the percentage of businesses that are optimistic and those that are pessimistic about the economy. A positive reading means optimists outnumber pessimists, while a negative figure indicates the opposite.

Business confidence for the next 12 months also weakened, with the index falling to 26.5 percent from 36.4 percent in the previous survey.

Despite the decline, both forward-looking indicators remained positive, suggesting that more businesses continued to expect economic conditions to improve in the coming months.

The BSP said optimism for the next three months was supported by expectations of stronger business activity during the holiday and rice harvest seasons, which typically boost consumer spending and demand for goods and services.

For the next 12 months, firms remained hopeful about growth opportunities in health care, education, tourism, financial services, real estate development and trade-related activities.

Businesses also cited prospects of lower inflation, streamlined business procedures, a possible resolution of the Middle East conflict and improved investor confidence as factors supporting their longer-term outlook.

Meanwhile, business sentiment for September itself remained negative, although the CI improved to -8.4 percent from -10.9 percent in August.

This indicated that pessimism among firms eased slightly during the month, even as more businesses continued to express negative views about current economic conditions.

“Firms attributed this pessimism mainly to elevated fuel and energy costs and rising prices. Other concerns included Middle East tensions, peso depreciation and weather-related disruptions,” the BSP said.

On inflation, firms continued to expect price increases to exceed four percent, the upper limit of the BSP’s two to four percent target range.

Inflation expectations are closely monitored by the central bank because they can influence businesses’ pricing decisions, wage adjustments and investment plans.

The survey also showed that employment prospects for the next 12 months remained positive but were less favorable than in August, suggesting that businesses continued to plan additional hiring, although optimism about job creation had weakened.

In contrast, more firms in the industry sector were planning to expand their operations, indicating continued interest in increasing production capacity despite prevailing economic uncertainties.

“The BSP continues to monitor developments in the Middle East and their potential effects on business and consumer sentiment, spending, and investment,” the central bank said.

It added that these indicators are among the factors considered in monetary policy decisions.

The September BES was conducted from Sept. 4 to 30, covering 515 firms nationwide, including 193 in the National Capital Region and 322 in areas outside Metro Manila. The survey covered all 18 regions and recorded a response rate of 49.9 percent.