BUSINESS sentiment in the Philippines turned positive at the start of the year, with companies expressing stronger optimism for the months ahead, according to the latest Business Expectations Survey (BES) of the Bangko Sentral ng Pilipinas (BSP).
In its January 2026 survey, the BSP reported that the overall business confidence index (CI) rose to 0.9 percent, reversing earlier pessimism and indicating that more firms were optimistic than pessimistic about current conditions.
The upbeat sentiment was attributed mainly to expectations of higher consumer demand for selected products and services — including garments, education services, loan products, mailing and shipping services, and motor vehicle parts — as well as business process improvements.
Stronger outlook for April and next 12 months
Firms were significantly more optimistic about the near and medium term. The three-month-ahead CI climbed to 33.3 percent for April 2026, while the 12-month outlook reached 38.6 percent.
Companies cited expectations of stronger summer demand, improved domestic economic conditions, and better investment prospects supported by recovering government spending and stronger investor confidence.
By location, sentiment diverged in January. Firms outside the National Capital Region (NCR) posted a CI of 20.6 percent, while NCR-based firms registered -8.0 percent. However, both areas turned more optimistic in their forward outlook.
Tight cash position, modest capacity use
Despite improved sentiment, firms reported tighter financial conditions. The financial condition index stood at -19.2 percent, while the credit access index was slightly negative at -0.6 percent, indicating expectations of constrained liquidity and financing conditions.
Average capacity utilization in the industry and construction sectors was 69.6 percent in January.
Major constraints cited by respondents included stiff domestic competition (62.2 percent of firms), insufficient demand (39.7 percent), and high interest rates (21.6 percent).
Hiring and expansion plans improve
Employment prospects were favorable for the months ahead. The employment outlook index rose to 11.3 percent for April and 23.3 percent for the next 12 months.
Expansion plans in the industry sector also picked up, with 14.1 percent of firms planning to expand within three months and 24.3 percent over the next year.
Larger firms were the most optimistic over the next 12 months, posting a CI of 57.6 percent, compared with 44.6 percent for medium-sized firms and 40.0 percent for small enterprises.
Peso seen weaker; inflation expectations anchored
Businesses expect the peso to depreciate against the US dollar, projecting an average exchange rate of P58.88 per dollar in January and April 2026, and P58.99 over the next 12 months.
Inflation expectations remain within target. Firms forecast inflation to average 2.2 percent in January, 2.4 percent in April, and 2.6 percent over the next 12 months — below the BSP’s 3 percent target but within its ±1 percentage point tolerance band.
Borrowing rate expectations were mixed. Firms anticipated lower peso borrowing rates in January, but expect rates to rise slightly in April and over the next 12 months.
The January 2026 BES was conducted from Jan. 9 to 31, covering 507 firms nationwide drawn from the top 7,000 corporations database. / KOC