Philippine companies are growing more optimistic about the broader economic outlook even as they scale back plans to expand operations, citing intense market competition and the lingering weight of high interest rates.

“Businesses expect steady consumer demand throughout the year. Firms also see higher public works spending and ongoing governance reforms supporting economic growth in 2026,” the BSP said.

According to the February Business Expectations Survey (BES) of the Bangko Sentral ng Pilipinas (BSP), the share of businesses in the industry sector with expansion plans in the near term dropped.

“Some respondents expressed optimism in the short term but remained cautious about their expansion plans,” the BSP said.

Data showed the share of firms with plans to expand over the next three months declined to 11.6 percent from 14.1 percent previously. For the year ahead, expansion plans dropped from nearly one-fourth of all respondent firms to 14.2 percent.

Last month, local companies reported having more available cash on hand while simultaneously finding it harder to secure external loans from the banking system.

However, overall, the confidence index (CI) for the next 12 months climbed to 51.1 percent in February from 38.6 percent in the previous month.

A positive CI indicates that more respondents are optimistic than pessimistic or anticipate “easy” conditions regarding the business outlook. Meanwhile, a negative index signals the opposite: more firms are pessimistic or expect “tight” conditions, such as restricted access to credit.

“Businesses expect steady consumer demand throughout the year. Firms also see higher public works spending and ongoing governance reforms supporting economic growth in 2026,” the BSP said.

Recall that government spending, especially on infrastructure, sharply declined in the second half of 2025 as the government tightened its grip on public funds following the eruption of flood control corruption.

Business confidence in the overall economic outlook improved for both the quarter and the year ahead. For the next three months, the CI climbed to 37.4 percent from 33.3 percent, while over the next 12 months it rose to 51.1 percent from 38.6 percent.

Firms anticipate short-term economic growth to be propped up by favorable weather, strong summer sales, and a pickup in government spending as investor confidence returns.

On prices, businesses expect the inflation rate to continue accelerating through next year. Note that the survey ended before the flare-up of the Israel-Iran military tensions.

“The sustained recovery in business confidence and stable inflation expectations will therefore depend on how long the conflict lasts and how it affects the domestic economy,” the BSP said.

Regarding the peso's strength, local businesses are more optimistic in the short term, while the long-term view is somewhat somber.

Firms expect the US dollar-peso exchange rate to average 58.76 over the next quarter and modestly weaken to 58.94 over the year ahead. It can be noted, however, that the ongoing direction of foreign exchange (forex) movements points to an even weaker peso.

Last Friday, the peso tumbled to a fresh record low, breaching the 60.5 level as geopolitical tensions in the Middle East intensified and the BSP signaled it sees no immediate need to defend the currency.