Business confidence rises in Q4 2025 but dips for early 2026

MANILA — Business confidence in the Philippines improved in the fourth quarter of 2025, driven by holiday-related consumer spending, streamlined operations, and favorable inflation, according to the latest Business Expectations Survey (BES) from the Bangko Sentral ng Pilipinas (BSP).

The overall confidence index (CI) rose to 29.7% in Q4 2025 from 23.2% in the previous quarter, signaling that more firms expressed optimism about current business conditions.

Firms attributed their upbeat sentiment to seasonal demand during the holidays, higher productivity, enhanced business processes, new product and service rollouts, and a benign inflation environment.

However, optimism weakened for the near-term outlook. The CI for the first quarter of 2026 dropped significantly to 23.7 percent from 49.5 percent in the previous survey, while the 12-month outlook fell to 40.4 percent from 48.1 percent.

The BSP stated that the lower outlook was primarily due to expectations of slower post-holiday sales, peso depreciation, higher inflation, and the lingering impact of corruption allegations, which had dampened investor confidence and heightened political risk concerns.

Despite these concerns, the BES found that businesses expect inflation to remain within the government’s target range of 2.0 to 4.0 percent over the next year.

Firms forecast inflation to average 2.2 percent in Q4 2025, 2.4 percent in Q1 2026, and 2.5 percent over the next 12 months, suggesting that inflation expectations remain well-anchored.

Employment sentiment also softened.

The employment outlook index for Q1 2026 declined to 12.2 percent from 18.5 percent in the previous quarter — the lowest level since Q4 2021.

However, the year-ahead employment outlook remained steady at 26.3 percent, indicating continued hiring plans at a moderate pace.

Regionally, business sentiment was more positive in Q4 2025 across both the National Capital Region and Areas Outside the NCR.

However, confidence weakened across all regions for the next quarter and year ahead, mirroring national trends.

Regions affected by natural calamities — including Davao Oriental, Cebu, and parts of CALABARZON and MIMAROPA — reported lower confidence levels due to disrupted business operations.

By sector, the industry, services, and retail sectors saw an uptick in business sentiment for the current quarter, citing seasonal demand and operational expansions.

Conversely, construction firms were less optimistic, citing project delays and the negative impact of ongoing corruption probes into public infrastructure spending.

The Q4 2025 BES surveyed 1,521 firms nationwide from October 7 to November 13.

Of the respondents, 581 were from the NCR and 940 from areas outside the capital.

The overall response rate was 57.2 percent, down from 61 percent in Q3, mainly due to severe weather-related disruptions during the survey period.

Conducted quarterly, the BES is a key economic surveillance tool of the BSP and serves as an input to its monetary policy formulation.