Business sentiment stays upbeat

Business remained optimistic in January as they expect higher consumer demand and better processes, with their outlooks for the quarter and year ahead also becoming more positive, results of the the Bangko Sentral ng Pilipinas’ (BSP) inaugural monthly business expectations survey (BES) showed.

The central bank’s BES for January showed that businesses had an overall current-month confidence index (CI) of 0.9%. A positive CI shows that more respondents are optimistic than pessimistic.

However, this was lower than the 29.7% CI in the fourth quarter of 2025.

“The optimistic sentiment of survey respondents in January 2026 was attributed primarily to expectations of: (a) higher consumer demand for certain products and services (e.g., garments, education services, loan products, mailing and shipping services, and motor vehicle parts), and (b) business process enhancements,” the central bank said.

The survey also showed that businesses showed more optimism for the next quarter and the next 12 months with CIs of 33.3% and 38.6%, respectively.

“Stronger consumer demand and sales, improved domestic economic conditions, and more favorable investment prospects lifted business confidence for the next quarter and over the next 12 months,” the BSP said.

Businesses see the upcoming dry season supporting consumer appetite, while they expect the recovery in government spending and better governance to prop up investments.

The release of the monthly BES marks the start of a more frequent assessment of business sentiment, the BSP said.

“The shift from a quarterly to a monthly survey will allow the BSP to monitor business confidence more closely and respond more effectively to rapidly changing domestic and external developments.”

The central bank earlier said it is also planning to conduct its consumer expectations surveys monthly.

This comes as BSP Governor Eli M. Remolona, Jr. earlier said that they are now putting a greater weight on confidence for their own macroeconomic surveillance as the fallout from a corruption scandal linked to flood-mitigation projects that came to light last year showed the impact of investor sentiment on growth.

TIGHTER FINANCIAL CONDITIONS

Meanwhile, firms said they see tighter cash positions and credit access in the first month of 2026.

Their financial condition index, which reflects a business’ general cash position considering the level of cash and other cash items and repayment terms on loans, stood at -19.2%.

The credit access index was at -0.6% in January. This refers to the environment external to the firm, including the availability of credit in the banking system and other financial institutions.

The latest BES also indicated that the average capacity utilization for the industry and construction sectors was at 69.6%.

“Respondents cited stiff domestic competition, insufficient demand, and high interest rates as major constraints to business activities in January 2026,” the BSP said.

Meanwhile, businesses showed favorable hiring intentions for April until January next year, with the employment outlook index for April at 11.3% and for the 12 months ahead at 23.3%.

“Industry sector expansion may gain momentum over the next 12 months,” the BSP said.

About 14.1% of businesses in the Philippine industry sector plan to expand in April, while 24.3% expect the same for the coming year.

INFLATION EXPECTATIONS

Businesses surveyed said they expected inflation to settle at 2.2% in January. This was faster than the actual 2% headline print recorded during the month.

Meanwhile, for April, they see inflation accelerating to 2.4% and picking up further to 2.6% over the next 12 months.

These are all within the central bank’s 2%-4% annual target.

“Business inflation expectations remain well-anchored,” the BSP said. It expects inflation to average 3.6% this year and 3.2% in 2027.

Firms also said that they expect the peso to weaken against the US dollar over the coming year, the survey showed.

They expect the peso-dollar exchange rate to average at P58.88 for January and April and to weaken to an average of P58.99 in the next 12 months.

The peso traded at the P58 to P59 levels in January, even hitting a new record low of P59.46 per dollar on Jan. 15. Based on BSP data, the peso-dollar exchange rate averaged at P59.1622 during that month.

“Meanwhile, businesses expect that peso borrowing rates may decline in January 2026, but may rise in April 2026 and over the next 12 months,” the central bank said.

Source: Business World

Philippines declines a spot in economic freedom index

The Philippines slipped one spot in a global index on economic freedom, despite improvements in some areas, according to the Canada-based think tank Fraser Institute.

The country ranked 62^nd out of 165 economies in conservative think tank’s Economic Freedom of the World report, which uses 2023 data. In the previous year’s index, the Philippines ranked 61^st place.

This was the Philippines’ lowest placement in the index in two years, or since it ranked 68^th in 2021.

Despite the lower ranking, the country’s score inched up to 7.05 out of 10 in 2023 from 7.01 in 2022.

Among Asia-Pacific jurisdictions, the Philippines lagged behind Hong Kong (8.55), Singapore (8.50), New Zealand (8.33), Australia (8.03), Taiwan (8.03), Japan (7.83), Malaysia (7.56), South Korea (7.53), Thailand (7.10), and Brunei Darussalam (7.09).

However, the Philippines was ahead of Indonesia (6.96), Mongolia (6.83), Cambodia (6.79), Vietnam (6.21), China (6.13), Papua New Guinea (6.09), Fiji (6.08), Timor-Leste (5.97), Laos (5.65), and Myanmar (4.46).

The index measures the degree to which citizens are allowed to make their own economic choices through five areas: size of government, legal system and property rights, sound money, freedom to trade internationally, and regulation.

The Philippines had its highest score in the sound money category with 9.01, ranking 34^th out of the 165 countries, slightly lower than its previous score of 9.04.

The country’s score in size of government went up to 7.88 from 7.77 previously. Its current ranking was at 21^st place from 26^th previously.

Manila’s score in regulation also went up to 6.65 (64^th) from 6.55 (67^th) previously.

However, the country yet again performed worst in the legal system and property rights area with a score of 4.57, ranking 109^th. Its score slightly improved from 4.55 previously.

Meanwhile, its score in freedom to trade internationally stood at 7.15, ranking 86^th from 87^th previously.

Foundation for Economic Freedom President Calixto V. Chikiamco said that the Philippines continues to underperform in the areas of legal system and property rights and trade freedom.

“Particularly in agricultural trade. We are still protecting our agricultural sector with quotas, high tariffs, and other forms of restrictions,” he said in a Viber message.

Meanwhile, Mr. Chikiamco said that the previous administration’s unilateral cancellation of the contracts with the private water concessionaires and refusal to abide by the decision of arbitration proceedings have impacted the country’s overall ranking.

“That and other instances where contracts aren’t honored cause low ratings of the country [in legal system and property rights],” he added.

However, Mr. Chikiamco said that the slight dip in the country’s ranking may also be attributed to improvements in other countries.

“The Philippines can fare better by dismantling agricultural protectionism, reforming an inefficient and corrupt judicial system, removing the Filipino First and Filipino Only provisions in the Constitution, and forging more free trade agreements with more economies,” he added.

Philippine Institute for Development Studies Senior Research Fellow John Paolo R. Rivera said that the results of the index suggest that the Philippines is making progress, but “other economies are reforming faster and more comprehensively.”

“We continue to lag in critical areas like rule of law, regulatory quality, judicial independence, and most especially corruption control, which weigh down its overall ranking,” he said in a Viber message.

To improve, he said that there is a need for the Philippines to strengthen its institutional frameworks.

“It must also enforce property rights, simplify regulations, and promote a more transparent and predictable policy environment to boost investor confidence and economic dynamism,” Mr. Rivera said.

According to the Fraser Institute, economic freedom has been declining since the pandemic.

“Global economic freedom peaked in 2019 but has declined in each of the four years since then, which hasn’t happened since we began measuring economic freedom more than 25 years ago,” Matthew Mitchell, a senior fellow at the Fraser Institute, said in the report.

Hong Kong topped the latest index, followed by Singapore, New Zealand, Switzerland, the United States, Ireland, Australia and Taiwan (tied for 7^th), Denmark, and the Netherlands.

However, the Fraser Institute expects US President Donald J. Trump’s tariffs to further depress US economic freedom.

“When countries move to restrict trade freedom, other areas of economic freedom, such as size of government, sound money, and regulatory freedom, often soon follow,” it added.

Meanwhile, the lowest scoring economies on the index were Venezuela, Zimbabwe, Sudan, Algeria, Iran, Myanmar, Argentina, Syria, Libya, and Chad.

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Source: Business World

PH firms less upbeat amid tariff worries

Business sentiment fell in the second quarter, the Bangko Sentral ng Pilipinas (BSP) reported late on Friday, primarily due to worries over unilateral tariffs ordered by US President Donald Trump.

The overall confidence index (CI) in the BSP’s latest Business Expectations Survey dropped to 28.8 percent from 31.2 percent three months earlier.

The primary concern raised by survey respondents, the BSP said, “was the potential economic effects of a 17-percent reciprocal tariff on Philippine exports to the US.”

“Although the higher tariff rate has been paused for 90 days and reverted to 10 percent, businesses still view this as a sign of rising global trade uncertainty,” it added.

“Businesses also expect fewer clients and orders in Q2 2025 due to the expected slowdown in business activity after the May midterm elections and the sugar off-milling season,” the BSP continued.

Sentiment was also lower with regard to the following quarter and the next 12 months, with the CIs for the two periods falling to 39.3 percent and 51.0 percent, respectively, from 45.4 percent and 56.4 percent.

For the third quarter, respondents cited global trade tensions that may be triggered by the US tariffs and also said that demand could drop due to the rainy season.

The more cautious year-ahead outlook, meanwhile, was attributed to the above factors and “expectations of fewer clients and orders due to expiring contracts and softer market conditions...”

Second-quarter sentiment was more upbeat among construction (38.2 percent from 35.8 percent), but declined for services (31.7 percent from 35.9 percent), wholesale and retail (31.8 percent from 34.1 percent), and industry (17.9 percent from 18.3 percent) sectors.

Anticipated projects during the summer lifted the construction sector outlook, the BSP said.

For the wholesale and retail trade and services sectors, the lower optimism was said to be “primarily due to concerns over US tariffs.”

“Additionally, weaker demand from rental contract expirations and client losses to competitors, further weighed on their sentiment,” the central bank added.

As for the next quarter, construction and services firms were less optimistic. The industry sector was more upbeat, meanwhile, while wholesale and retail trade sentiment was little changed.

Over the next 12 months, long-term confidence dipped in most sectors, with construction the exception.

Companies said that cash positions and credit access would remain tight in the second quarter while the hiring and expansion outlooks for the third quarter and the next 12 months remained positive but were lower compared to three months earlier. 

The peso is expected to strengthen against the dollar over all three periods, averaging P57.09:$1, P57.12 and P57.14, respectively, during the second quarter, third quarter and the next 12 months.

Inflation could rise due to election-related spending, US tariffs, fuel prices, agricultural losses due to bad weather and supply constraints, among other factors, but expectations remained within the government’s 2.0- to 4.0-percent target.

“Within-target inflation supports investments and job creation,” the BSP said.

Source: Manila Times