PHL business sentiment wavers, yet optimism for H2 2024 prevails

The business landscape* in the Philippines experienced a tempered confidence in the first quarter of 2024, with the overall confidence index (CI) dipping to 33.1 percent from 35.9 percent in the last quarter of 2023, as per the recent report.

Experts link this decline to various factors, such as the post-holiday demand slump, persistent inflation with significant impacts from elevated food and oil prices, intense market competition, and the considerable repercussions of a robust El Niño on agriculture.

Nevertheless, the outlook for Q2 2024 signals a resurgence of optimism among businesses, with the CI projected to jump to 48.1 percent. This bullish sentiment is largely credited to anticipations of increased demand, a conducive business environment prompting the completion of more projects, a seasonal boost in tourism and fisheries, expansion and innovation drives, along with hopes for softer inflation.

Looking further ahead, firms harbor an even brighter vision for the next 12 months, as the CI is forecasted to soar to 60.8 percent, bolstered by expectations of enduring strong demand, favorable economic climate, lower inflation rates, and expansionary activities, alongside reduced interest rates.

While the sentiment remained less upbeat for industry and wholesale and retail trade sectors during Q1 2024, it turned more positive for construction and remained stable for services. Notably, across all sectors, businesses express a more optimistic outlook for Q2 2024 and the ensuing year.

Capacity utilization also saw an uptick in Q1, climbing to 72.3 percent, hinting at a potential rise in hiring and an expansion in the product lines or production capacity, especially within the industrial sector.

However, firms reported tight financial conditions, with a modest improvement in credit access. Meanwhile, there’s an anticipation of a stronger Philippine peso, but concerns linger over potentially higher inflation and interest rates, possibly averaging around 5 percent, which exceeds the government’s target range.

In summary, despite the ebb in confidence experienced at the year’s outset, the Philippine business sector remains resilient, drawing strength from forward-looking perspectives and strategic adaptations to economic challenges.

View Full Report: Expectations Report/Attachments/22/BES_1qtr2024.pdf


*The Q1 2024 BES was conducted during the period 5 January – 12 March 2024. There were 1,525 firms surveyed nationwide, consisting of 581 companies in the NCR and 944 firms in AONCR, covering all 16 regions nationwide. Samples were drawn from the Top 7,000 Corporations ranked based on total assets in 2017 from the Bureau van Dijk (BvD) database. The nationwide survey response rate for Q1 2024 was lower at 60.3 percent (from 65.1 percent in Q4 2023). The response rate was lower for both the NCR at 60.2 percent (from 61.9 percent) and AONCR at 60.4 percent (from 66.9 percent).