Slightly positive business sentiment signals ‘cautious optimism’ in the Philippines

By Katherine K. Chan, Reporter

LOCAL BUSINESSES’ slightly positive outlook in January hints at “cautious optimism,” indicating that economic recovery may be on track but still weak, analysts said.

SM Investments Corp. Group Economist Robert Dan J. Roces said Philippine firms’ near-zero confidence index (CI) in January signals that “recovery is intact but fragile.”

“Firms are not pulling back decisively, but neither are they strongly accelerating hiring, capex (capital expenditure), or inventory buildup,” he told BusinessWorld in a Viber message. “Typically, a CI close to zero reflects caution — often tied to cost pressures, demand uncertainty, or external and internal risks.”

Based on the Bangko Sentral ng Pilipinas’ (BSP) maiden monthly business expectations survey (BES), businesses were a tad more optimistic in January as their CI stood at 0.9%.

A positive CI shows that more respondents are optimistic than pessimistic.

“A confidence index of 0.9% tells us the recovery is still intact, but very fragile,” Jonathan L. Ravelas, a senior adviser at Reyes Tacandong & Co., also told this paper via Viber. “Businesses are slightly optimistic, not exuberant. It suggests firms are seeing stabilization, but they’re still cautious on spending, hiring, and expansion.”

Last year, extensive flooding uncovered multiple substandard or nonexistent flood control projects across the country, sparking investigations into corruption allegations involving lawmakers, Public Works officials, and private contractors.

The controversies tainted consumer and business confidence, dragging the economy to its worst performance since the pandemic.

The Philippine gross domestic product (GDP) grew by only 3.9% in the third quarter of 2025 and weakened further to 3% in the fourth quarter as investments and spending remained sluggish, bringing full-year expansion to 4.4%.

Earlier this year, BSP Governor Eli M. Remolona, Jr. said recent figures show “tentative signs” of improving business confidence, fueling their projection that the economy will bounce back by the second half.

Among the data he cited were the S&P Global Manufacturing Purchasing Managers’ Index (PMI), the Philippine Stock Exchange index (PSEi) and government bond yields.

In January, the Philippines’ manufacturing PMI rose to a nine-month high of 52.9 in January from 50.2 in December. It further improved to 54.6 in February, the fastest pace in over eight years.

However, John Paolo R. Rivera, a senior research fellow at the Philippine Institute for Development Studies, said business sentiment in January points to “modest rather than strong” growth in the near term.

“For recovery prospects, this means growth is likely to remain modest rather than strong in the coming quarters,” he told BusinessWorld in a Viber message. “Businesses may delay expansion, hiring, and capital expenditure decisions until there is clearer evidence of sustained demand, policy stability, and global economic improvement.

“Momentum appears fragile and confidence driven recovery remains incomplete,” he added.

For Mr. Ravelas, businesses need more clarity on the government’s policies for the economy to recover stronger.

“For the recovery to gain traction, businesses need clearer signals on inflation easing, interest rate direction, and global demand,” he said. “Without those, confidence will likely stay near neutral rather than accelerate.”

For this year, the central bank expects GDP growth to average 4.6%, before expanding further to 5.9% in 2027.