Business sentiment remained upbeat in the fourth quarter of this year, data from the Bangko Sentral ng PIlipinas showed, as the overall confidence index stood at 35.9 percent, up slightly from 35.8 percent in the previous quarter.
This is reflective of the increase in the percentage of optimists, which was barely offset by the increase in the percentage of pessimists.
The current quarter’s CI stayed positive due to the optimistic firms’ expectations of: an increase in demand for goods and services during the Christmas season, sustained economic recovery to pre-pandemic levels, business expansions in the utilities, trade, financial, and hotels and restaurant sub-sectors, development and launch of new products and services, and brisker consumer spending on the back of higher remittances and inbound holiday travelers, including Overseas Filipino Workers (OFWs).
However, the current quarter’s CI was tempered by concerns of pessimistic firms over the negative economic impact of the ongoing conflicts in Gaza and Ukraine, elevated inflation, and higher interest rates.
Business sentiment across all sectors remains optimistic for Q4 2023, BSP said.
The positive CIs of the industry, wholesale and retail trade, construction and services sectors reflected continued optimism in the said sectors. In particular, optimism in the industry and wholesale and retail trade sectors improved but weakened in the construction and services sectors.
The business sentiment of domestic-oriented firms, exporters, and importers was more favorable, while that of the dual-activity firms was less buoyant.
The average capacity utilization in the industry and construction sectors for Q4 2023 increased slightly to 70.9 percent from 70.5 percent in Q3 2023.
The cash or liquidity positions of firms may remain tight as the financial condition index stayed negative at around -15 percent for Q4 2023. Moreover, businesses anticipated that their access to credit to be tighter for Q4 2023.
Businesses expect that the peso may depreciate against the US dollar in Q4 2023 and Q1 2024 but may appreciate in the next 12 months. Meanwhile, firms expect that the inflation and the peso borrowing rates may rise for all reference periods. Further, firms expect that inflation may remain above the upper end of the National Government’s 2—4 percent inflation target range for 2023-2024. In particular, businesses expect that the inflation rate for Q4 2023, Q1 2024, and the next 12 months may average at 6.4 percent, 6.3 percent, and 6.2 percent, respectively.
The consumer outlook in the Philippines was more pessimistic for Q4 2023 as the overall confidence index became more negative at -19 percent from -9.6 percent in Q3 2023.
This is reflective of the combined decrease in the percentage of optimists and increase in the percentage of pessimists.
The weaker confidence among consumers stemmed from their concerns about the faster increase in the prices of goods, lower income, fewer available jobs, and the effectiveness of government policies and programs on inflation management, public transportation, and financial assistance to low-income households.
For the next quarter (Q1 2024) and the next 12 months, consumer optimism weakened as the CIs declined to 5.6 percent and 15 percent.
Across the three component indicators (i.e., country’s economic condition, family’s financial situation, and family income), consumers were more pessimistic for Q4 2023 as the respective indices of the component indicators became more negative. Similarly, consumer confidence for the current quarter deteriorated across the income groups, i.e., pessimism increased in the low- and middle- income groups, and optimism turned into pessimism in the high-income group.
The consumer sentiment on buying big-ticket items for Q4 2023 was more pessimistic as the CI became more negative at -71.3 percent from -62.7 percent in Q3 2023.
In Q4 2023, 22.9 percent availed of a loan in the last 12 months, lower than the 26.6 percent recorded in Q3 2023. Further, the percentage of households with savings declined to 29.1 percent in Q4 2023 from 32.8 percent in Q3 2023.
Consumers anticipate that the interest and unemployment rates may increase and the peso may depreciate against the US dollar for the current quarter, next quarter, and the next 12 months. Meanwhile, households also expect that the inflation may increase at a faster rate for all reference periods as the number of respondents who expect higher inflation for said periods increased compared with the Q3 2023 survey results. Specifically, consumers expect that the inflation rate may average at 6.9 percent for the next 12 months, which is above the upper end of the National Government’s inflation target range of 2 to 4 percent for 2023-2024.
