Business optimism affirmed by BSP survey

Local businesses were upbeat in January, the first month of the year, it was disclosed by the Bangko Sentral ng Pilipinas (BSP).

The BSP based its conclusion on the results of its recent business expectations survey (BES), which showed a positive confidence index (CI) of a little less than one percent.

The Bangko Sentral intends to do its surveys on a monthly basis.

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, as more firms are pessimistic or expect “tight” conditions, such as restricted credit access.

The central bank, however, did not disclose how many business establishments were surveyed, from what areas of trade and commerce, finance or manufacturing these firms are in, and their geographical circumstances, since the survey is said to be national in scope.

Furthermore,  the survey showed that the business outlook for the next quarter and for 2027 was even more optimistic, garnering indices of 33.3 percent and 38.6 percent, respectively.

Firms were more upbeat for the succeeding periods as they expect “stronger consumer demand and sales for specific goods and services during the summer season and for most products for the rest of the year.”

In addition, firms were banking on an improved economy following successive slumps, and investment prospects were propped up by “recovering government spending, better governance, and stronger investor confidence.”

Some economists and analysts, however, questioned the survey fact of perceived optimism when at the same time, the businessmen “expected  a tight cash position and limited access to credit. Both indices were negative, with the financial condition index recording -19.2 percent,” as reported by the local broadsheets.

“Respondents cited stiff domestic competition, insufficient demand, and high interest rates as major constraints to business activities in January 2026,” the survey report published on Friday, Feb. 27, read.

On prices, businesses expected inflation to average 2.2 percent in January, 2.4 percent in April, and 2.6 percent through 2027. These expectations fall within the central bank’s target range of two to four percent.

For local businesses, the peso is expected to weaken to 58.88 per United States (US) dollar in early 2026 and 58.99 over the next year.

With favorable conditions expected ahead, businesses could onboard more staff over the next quarter and year, as employment indices were 11.3 percent and 23.3 percent, respectively.

Moreover, 14.1 percent of businesses have expansion plans for April, while a fourth are planning to grow over the next year.

“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.”

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.

It may be recalled that Remolona Jr. has given up on monetary policy as principal driver of economic growth.

Remolona said monetary policy has reached the limits of its effectiveness in reviving the Philippine economy, shifting the burden to the legislative and executive departments of the government to implement fiscal reforms and address governance failures.

He stressed  that while the central bank is doing its part to lower borrowing costs, interest rate cuts alone cannot compensate for the structural issues that triggered the sharp economic slowdown in 2025.

“We have very limited tools in monetary policy. We’re at the point where monetary policy cannot do much more,” Remolona said in a television interview.

Remolona’s statements follow the Monetary Board’s decision to reduce the key policy rate by 25 basis points to 4.25 percent, a move aimed at cushioning an output slump that the central bank had previously failed to anticipate.