Business sentiment remains upbeat on the back of positive factors such as the midterm elections in May and low interest rates, the latest central bank survey showed, but the major risk may yet come from the impact of US trade policies, a lead bank economist said on Sunday.
In light of the Q1 Business Expectations Survey (BES) results released by the Bangko Sentral ng Pilipinas (BSP) over the weekend, RCBC chief economist Michael Ricafort said higher government spending on infrastructure and other government projects before the election ban also sustained upbeat expectations by the business sector.
For the second quarter of 2025 alone, the BES results showed the country’s business sentiment turned more upbeat, with the overall Confidence Index (CI) level rising to 45.4 from 40.3 in the previous survey.
The previous rate cuts by the BSP Monetary Board and the US Federal Reserve, and better weather conditions in early 2025 are the obvious factors why businesses remain positive about the prospects in the coming months, Ricafort said.
The business outlook also remains buoyant for the next 12 months, with the overall CI steady at 56.4, unchanged from the previous survey.
Ricafort pointed out that this year’s midterm elections could lead to faster economic growth, considering that election spending has the power to stimulate businesses.
Business sentiment improved after the US Fed rate cuts from September 2024 and the total BSP rate cuts of 75 basis points since August 2024 reduced borrowing costs, he added.
As more money circulates in the financial system, expectations also grow that investments will increase and stimulate trade, hiring and other business activities.
The survey results are also a reflection of good weather conditions so far this year, Ricafort said.
In contrast, the series of typhoons in the fourth quarter of 2024 caused economic disruptions.
Not all rosy
But Ricafort said not all is rosy in the coming months.
The major risk remains tied to US President Donald Trump’s tariffs policy and other protectionist measures that could lead to weaker global trade, he said.
On the domestic front, the BSP said sentiment toward the second quarter of 2025 has become generally more upbeat as businesses anticipate higher election-related demand for goods and services, while business operations expand as economic conditions improve.
Optimism on contruction/services
For the next 12 months, businesses involved in construction and services have turned more optimistic, while those in the industry sector maintained an upbeat outlook, the BSP said
Companies expect the peso to depreciate against the US dollar in the first and second quarters of 2025, but they also expect the exchange rate to turn in favor of the peso beyond the first half of the year.
The survey was conducted from January 8 to March 1, 2025.
A total of 1,527 companies were surveyed nationwide, comprising 582 in the National Capital Region (NCR) and 945 in areas outside the NCR in all 17 regions across the country.
