Businesses in the Philippines have grown more optimistic about the coming months, buoyed by improved sentiment in February, as revealed by the latest Business Expectation Survey (BES) from the Bangko Sentral ng Pilipinas (BSP). Firms attribute this positive shift to stronger demand, seasonal influences, and sustained government expenditure, which are acting as key drivers of growth. The survey was conducted prior to the Middle East conflict, an event that has since elevated oil prices and disrupted global supply chains.
Broad-Based Improvement in Confidence
The BSP reported a notable rise in business confidence indices. The three-month-ahead confidence index increased to 37.4 percent from 33.3 percent, while the year-ahead outlook surged to 51.1 percent from 38.6 percent, indicating a widespread enhancement in expectations. Companies anticipate firmer consumer demand during the summer season, supported by favorable weather conditions, increased public infrastructure spending, and stable inflation rates.
Over the next 12 months, businesses also foresee stronger sales during peak and holiday periods, alongside improvements in productivity and investment prospects. This optimistic outlook follows a rebound in current business sentiment in February, with the confidence index climbing to 8.2 percent from 0.9 percent in January, reflecting a greater number of optimistic firms compared to pessimistic ones.
Drivers of February's Uptick
The uptick in February sentiment was propelled by expectations of higher income and sales across various sectors, including food and beverages, financial services, education, and construction. Additionally, better domestic economic conditions and sustained governance and infrastructure reforms contributed to this positive trend.
Persistent Headwinds and Challenges
Despite the improved outlook, firms continue to face significant headwinds. Cash positions remain tight, though slightly improved, while access to credit has become more constrained. Average capacity utilization in the industry and construction sectors slipped to 67.2 percent from 69.6 percent, signaling some moderation in production activity.
Businesses cited stiff competition, insufficient demand, and high interest rates as the primary constraints on operations during this period. However, hiring intentions have improved, with the employment outlook index rising to 27.2 percent for the next three months and 30 percent for the next 12 months, indicating stronger labor demand.
Cautious Expansion and Economic Indicators
Expansion plans among industrial firms have declined, suggesting that while sentiment is improving, some companies remain cautious about capital investments. Inflation expectations remain well-anchored within the central bank's target range, and firms anticipate the peso strengthening in the short term before weakening over the next year. Borrowing costs are expected to ease in the near term but rise over the longer horizon.
Survey Methodology and Scope
The February 2026 BES was conducted from February 5 to 28, involving a total of 502 firms surveyed nationwide. This sample comprised 196 companies (39 percent) in the National Capital Region (NCR) and 306 firms (61 percent) in areas outside the NCR, covering all 18 regions across the country. The comprehensive scope ensures a representative view of business sentiment throughout the Philippines.
