The business sentiment in the Philippines was more optimistic in the fourth quarter of last year as the overall confidence index (CI) climbed to 44.5 percent from 32.9 percent in the third quarter, Bangko Sentral ng Pilipinas date showed.
The central bank said this reflected the combined increase in the percentage of optimists and the decrease in the percentage of pessimists.
The firms’ more bullish business confidence in Q4 2024 was driven by their anticipation of an increase in demand for certain goods and services and the related seasonal uptick in business activities.
In particular, this could lead to increased demand in agricultural products, infrastructure projects, shipping and distribution services, transportation units, enrollment, chemicals, graphics services, among others.
Moreover, the expected easing inflation and lower interest rates as well as the expansion and improvement of business operations buoyed business sentiment.
For Q1 2025, the country’s business confidence was less upbeat as the overall CI dropped to 40.3 percent from 56.8 percent in the Q3 2024 survey results.
For the next 12 months, business outlook was similarly less buoyant as the overall CI declined to 56.4 percent from 58.0 percent in the Q3 2024 survey results.
The Q4 2024 business sentiment was more optimistic across all sectors, except in the construction sector, whose outlook was less upbeat.
The CIs of importers, exporters, dual-activity (both importer and exporter), and domestic-oriented firms were higher compared with the Q3 2024 survey results.
The average capacity utilization of the industry and construction sectors in Q4 2024 increased to 73.9 percent from 71.9 percent in Q3 2024.
Firms expect less tight cash or liquidity positions in Q4 2024 as the financial condition index improved. Similarly, businesses anticipate easy access to credit in Q4 2024 as the credit access index (CAI) reverted to the positive territory.
Firms expect that the peso may appreciate against the US dollar in Q4 2024, Q1 2025 and the next 12 months. Further, firms expect that peso borrowing rates may rise for the same periods.
Businesses anticipate that the inflation rate may rise in Q4 2024, Q1 2025, and the next 12 months. However, inflation expectations may ease in 2025 as the percentage of firms that expect higher inflation decreased vis-à-vis the Q3 2024 survey results.
Firms also expect that the inflation rate may average at 3.6 percent in Q4 2024, and 3.7 percent in Q1 2025 and the next 12 months, which are all within the National Government’s 2.0–4.0 percent inflation target range for 2024-2025.
Meanwhile, the consumer sentiment for Q4 2024 improved as the overall confidence index turned less negative at -11.1 percent from -15.6 percent in Q3 2024.
This reflected a combined increase in the percentage of optimists and a decrease in the percentage of pessimists. Respondents attributed their less pessimistic sentiment for Q4 2024 to expectations of: higher and additional sources of income, more working family members, and more available jobs and permanent employment.
For the next quarter and the next 12 months, consumer confidence also improved. The more upbeat outlook of consumers for both periods was attributed to expectations of: higher income, additional sources of income, and more available jobs.
The consumer confidence across the three component indicators (i.e., country’s economic condition, family’s financial situation, and family income), and across all income groups (i.e., low-income, middle-income, and high-income groups) was less pessimistic for Q4 2024.
The consumer sentiment on buying big-ticket items for Q4 2024 was less pessimistic as the CI turned less negative at -67.3 percent from -68.9 percent in Q3 2024.
The percentage of households with savings declined to 25.6 percent in Q4 2024 from 29.0 percent in Q3 2024. Meanwhile, around 25.5 percent of households availed of a loan in the last 12 months, unchanged from Q3 2024.
Consumers anticipate that interest rates may increase and the peso may depreciate against the US dollar for Q4 2024, Q1 2025, and the next 12 months.
Furthermore, households expect that the unemployment rate may increase across all reference periods.
Households expect that the inflation rate may increase in the near term and over the next 12 months.
However, the percentage of respondents who expect higher inflation declined compared with the Q3 2024 survey results.
Specifically, consumers expect that the inflation rate may average 6.2 percent for the next 12 months, which is above the National Government’s inflation target range of 2.0 to 4.0 percent for 2024-2025.
