First-quarter sentiment among local business owners revealed reduced confidence in the industry's health, primarily due to a seasonal decline in consumer demand following the holiday period.
According to data from the Bangko Sentral ng Pilipinas (BSP), the overall confidence index (CI) declined to over 31 percent from 44.5 percent in quarter four of 2024.
“This decline reflects a combination of a decreased percentage of optimists and an increased percentage of pessimists,” the central bank said in a March 28 statement.
Specifically, the less optimistic outlook for the present quarter was driven by concerns about “the post-holiday decline in demand for goods and services, along with a slowdown in business activities, and a potential resurgence of inflationary pressures.”
February inflation, however, slowed to its lowest in five months at 2.1 percent.
Business confidence across all types of trading firms was generally less optimistic.
The confidence indices of exporters, dual-activity firms—those involved in both importing and exporting—and domestic-oriented companies declined compared to the quarter-four 2024 survey, while importers' confidence remained mostly unchanged.
Firms anticipate tighter financial conditions and credit access.
They expect more constrained cash or liquidity positions, as reflected by the more negative financial condition index.
Additionally, businesses foresee limited access to credit, with the credit access index returning to negative territory.
Meanwhile, sentiment in the construction sector did not significantly change from the higher optimism of the previous quarter.
The average capacity utilization in the industry and construction sectors dropped to a little over 71 percent from nearly 74 percent in the last quarter of 2024.
For the first half of 2025, businesses expect a weaker peso and higher interest rates.
They anticipate the peso depreciating against the US dollar in the first and second quarters but strengthening over the next year.
Firms also foresee rising peso borrowing rates during this period.
Business sentiment improved for the second quarter, with the overall CI rising to 45.4 percent from 40.3 percent in quarter four of 2024.
“For the next 12 months, the business outlook remained buoyant,” the BSP said, with the CI steady at 56.4 percent, unchanged from the previous survey.
Additionally, businesses expect inflation to rise in the first and second quarters of 2025, as well as over the next 12 months.
Stronger inflation expectations are likely across all periods, as more firms anticipate higher inflation compared to the quarter-four 2024 survey.
Firms expect the inflation rate to average 3.2 percent in the period, 3.3 percent in quarter two, and 3.4 percent over the next 12 months—all still within the government’s two to four percent target range for 2025-2026.