Business sentiment in Philippines softens in Q1 2024

Cebu City skyline
Cebu City skyline (SunStar File)

THE business sentiment in the Philippines softened in the first quarter of 2024, or in the months of January, February and March, with the overall confidence index declining to 33.1 percent from 35.9 percent in the months of October, November, and December or the fourth quarter of 2023.

Also read: Consumer sentiment in Philippines improves slightly in Q1 2024

The Bangko Sentral ng Pilipinas (BSP), in a statement Friday, April 12, said the decrease reflects businesses' pessimistic outlook, primarily due to concerns about post-holiday demand decline and slowdown in businesses, inflationary pressures stemming from higher food and oil prices, stiff competition, and the expected impact of the El Niño weather phenomenon on agriculture sector.

However, the BSP said projections indicate a significant rebound for the second quarter of this year, or from April to June. The survey shows that business confidence surged, with the CI rising to 48.1 percent.

"The firms’ more optimistic outlook for Q2 2024 was attributed to their expectations of: (a) higher demand for products and services, (b) completion of more projects due to a more conducive business environment, (c) seasonal uptick in business activities in the tourism and fisheries sub-sectors during the summer and open fishing seasons, (d) business expansions and development of new products, and (e) easing inflation," the BSP said.

Business optimism also extends to the next 12 months, with the CI hitting 60.8 percent. Businesses expect sustained strong demand, favorable economic conditions, lower inflation, continued expansion, and potentially lower interest rates, according to the central bank.

Sentiment for the second quarter and the next 12 months is also upbeat in all sectors, except construction, which remains favorable but less optimistic than the first quarter, according to the BSP.

The BSP further said importers, exporters and domestic-oriented firms were less optimistic in the first quarter of 2024, while dual-activity firms were more upbeat. Projections indicate optimism across all trading groups for the rest of the year.

While businesses anticipate tighter financial conditions in the first quarter of 2024, access to credit is expected to improve.

Firms expect a stronger peso but higher inflation and interest rates in first and second quarters of 2024, and the next 12 months.

Businesses also expect that inflation may exceed the government target of two to four percent for 2024-2026.

"In particular, businesses expect that the inflation rate may average at five percent in the first half of 2024 and the next 12 months," the BSP said. (KAL)


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