Philippine Business Sentiment Shifts to Positive Territory in Early 2026
Business sentiment in the Philippines has turned positive at the start of 2026, marking a reversal from earlier pessimism, according to the latest Business Expectations Survey (BES) released by the Bangko Sentral ng Pilipinas (BSP). The survey, conducted from January 9 to 31, 2026, covered 507 firms nationwide drawn from the top 7,000 corporations database, revealing a notable uptick in corporate optimism.
Overall Confidence Index Rises to 0.9 Percent
In its January 2026 survey, the BSP reported that the overall business confidence index (CI) climbed to 0.9 percent. This positive shift indicates that more firms are now optimistic than pessimistic about current economic conditions. The improved sentiment is primarily attributed to expectations of higher consumer demand for specific products and services, including garments, education services, loan products, mailing and shipping services, and motor vehicle parts, as well as anticipated business process improvements.
Strong Optimism for Near and Medium Term
Firms expressed significantly stronger optimism for the coming months. The three-month-ahead CI surged to 33.3 percent for April 2026, while the 12-month outlook reached an impressive 38.6 percent. Companies cited expectations of robust summer demand, improved domestic economic conditions, and better investment prospects, supported by recovering government spending and stronger investor confidence.
Regional Sentiment Diverges but Forward Outlook Improves
By location, business sentiment showed divergence in January. Firms outside the National Capital Region (NCR) posted a CI of 20.6 percent, while NCR-based firms registered a negative CI of -8.0 percent. However, both areas turned more optimistic in their forward-looking assessments, suggesting a broader recovery across the country.
Financial Conditions Remain Tight Despite Improved Sentiment
Despite the upbeat sentiment, firms reported tighter financial conditions. The financial condition index stood at -19.2 percent, and 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, reflecting modest operational levels.
Major constraints cited by respondents included stiff domestic competition, mentioned by 62.2 percent of firms, insufficient demand at 39.7 percent, and high interest rates at 21.6 percent.
Employment and Expansion Plans Show Improvement
Employment prospects appear 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.
Currency and Inflation Expectations
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 the BSP's target range. 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.
