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May 27, 2024

BSP: Business confidence dims in Q1, rebound expected in Q2

Business confidence took a hit in the first quarter of this year due to inflation, intense competition, and adverse weather conditions linked to El Niño.

However, a Bangko Sentral ng Pilipinas (BSP) survey suggests a potential shift to a more positive outlook in the second quarter and beyond, buoyed by factors such as company expansions and expected relief from price pressures on essential goods.

According to the latest Business Expectations Survey (BES) released on April 12, Redentor Paolo M. Alegre Jr., senior director at the Department of Economic Statistics, noted a decline in the overall confidence index (CI) to 33.1 percent in the first quarter from 35.9 percent in the fourth quarter of 2023 due to post-holiday demand slowdown, inflation, tough competition, and the effects of El Niño.

Despite facing these challenges, Alegre remained optimistic about the outlook for the second quarter of 2024. His optimism is supported by several factors including rising demand, a business-friendly environment facilitating project completions, seasonal upswings in the tourism and fisheries sectors, and the anticipated alleviation of inflationary pressures.

Businesses, meanwhile, foresee continuing tight financial conditions and limited credit accessibility in the first quarter. Market dynamics, including expectations of a stronger peso against the US dollar, alongside forecasts of higher inflation and interest rates, are influencing business sentiment for the first half of 2024.

Moreover, firms anticipate inflation to remain above the government’s target range, averaging around 5 percent for the first half. The overall CI (confidence index) for the next 12 months increased to 60.8 percent, driven by factors like sustained demand, favorable economic conditions, lower inflation, expansion plans, and reduced interest rates.