Business sentiment stays upbeat, BSP survey says

By Katherine K. Chan, Reporter

BUSINESSES 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.