The Philippine economy is heading into 2026 on a note of contrasting sentiments, as revealed by the latest surveys from the Bangko Sentral ng Pilipinas (BSP). While Filipino households maintain a broadly optimistic view of their future, business leaders are signaling growing caution, pointing to potential headwinds for growth in the coming year.
Households: Cautious Hope Amidst Concerns
The BSP's Consumer Expectations Survey, conducted from October 1 to 13, 2025 with about 5,000 households, found that the overall outlook for the first quarter of 2026 remained in positive territory at 3.6 percent. Looking further ahead, sentiment for the next 12 months stood at a more robust 11.8 percent, though both indices eased from the previous quarter's readings.
This forward-looking optimism, however, is tempered by significant worries. Households cited concerns over rising inflation, lower income, unfavorable weather, natural calamities, and governance issues like graft and public service delivery as key factors dampening their spirits.
More strikingly, confidence in current conditions deteriorated sharply. The overall current-quarter confidence index plunged to -22.2 percent in the fourth quarter of 2025 from -9.8 percent in the prior quarter. All components—views on the national economy, family finances, and family income—declined. The index for overall economic conditions sank to -48.4 percent, its lowest point in five years.
Spending Plans Defy Gloom, Businesses Brace for Slowdown
Despite the weaker current sentiment, Filipino families signaled firmer spending plans for early 2026. The spending outlook index for goods and services rose to 43.7 percent, driven by expectations of higher outlays on food, housing, utilities, transport, education, health, and recreation. More households also plan to save, with saving sentiment turning positive.
In stark contrast, the business sector is preparing for a more challenging environment. The BSP's Business Expectations Survey, covering around 7,000 top corporations from October to November 2025, showed a dramatic shift. The business confidence index for the next quarter (Q1 2026) plummeted to 23.7 percent in Q4 2025 from 49.5 percent, marking the weakest near-term outlook since the height of the COVID-19 pandemic. The year-ahead confidence index also softened to 40.4 percent from 48.1 percent.
Firms pointed to expectations of a post-holiday sales slowdown, rising inflation, peso depreciation, and governance concerns as major weights on their outlook. "Businesses are factoring in softer demand after the holidays, tighter financial conditions and policy uncertainty," the BSP noted.
Key Forecasts and Economic Implications
The surveys paint a detailed picture of expectations for key economic indicators:
- Currency: Businesses anticipate the peso to weaken further, forecasting an average exchange rate of around P57.96 per US dollar in Q1 2026 and P57.94 over the next 12 months.
- Employment: Hiring plans have softened. The employment outlook index for Q1 2026 slipped to 12.2 percent from 18.5 percent, indicating companies still plan to hire but at a slower pace.
- Financial Conditions: Firms expect tighter credit access and weaker cash positions in the period ahead.
The central bank highlighted that the divergent survey results underscore risks to the growth outlook. The resilience in household spending intentions may collide with more cautious business investment and hiring plans in early 2026. This growing split in sentiment between consumers and corporations will be a critical area to watch as the new year unfolds.
