An aerial view of Metro Manila. — PHILIPPINE STAR/WALTER BOLLOZOS

BUSINESSES NOW have a more optimistic economic outlook this year, amid a return to pre-pandemic normalcy and increased consumer demand, a survey by the Bangko Sentral ng Pilipinas (BSP) showed.

The BSP confidence index (CI) rose to 34% in the current quarter, improving from the 32.9% a year ago and 23.9% in the fourth quarter.

Businesses are more upbeat for the second quarter, as the CI jumped to 49% from 31.3% previously.

Business expectations survey

Firms’ outlook on the economy for the next 12 months also improved, as the index rose to 61.9% from 46.2% previously.

“The overall confidence indices during these periods significantly increased from the previous quarter’s survey result,” the BSP said in a statement.

The BSP survey was held from Jan. 13 to March 6, and covered 1,554 firms.

“For Q1 2023, the more upbeat outlook of respondents was attributed to expectations of: (a) higher consumer demand for products and services, (b) full reopening of the economy and return to pre-pandemic normalcy as more COVID-19 restrictions are lifted, (c) increased business activities and sustained economic recovery, and (d) expansion and new business opportunities in healthcare, manufacturing, and construction sub-sectors,” the BSP said.

The business sentiment for all sectors is more optimistic in the first quarter, while the outlook for all types of trading firms were generally more upbeat, the BSP said.

In the first quarter, the average capacity utilization in the construction and industry sectors grew to 74.8% from 72.1% a quarter earlier. 

Firms also expect financial conditions and access to loans to be “less tight,” as the indices improved but remained negative.   

According to the BSP, businesses also anticipate higher borrowing costs, elevated inflation and a stronger peso in the near term.

“For Q1 and Q2 2023, and the next 12 months, businesses expect that the peso may appreciate against the US dollar and the peso borrowing (costs) and inflation rates may rise,” the BSP said.

Even as firms still see inflation breaching the upper end of the 2-4% target range for 2023-2024, the survey showed a number of respondents who expect higher inflation declined versus the previous quarter.

“Particularly, businesses are expecting that inflation for first quarter 2023, second quarter 2023 and the next 12 months may average at 7%, 6.9%, and 6.6%, respectively,” the BSP said.   

Inflation slowed to 8.6% in February from a 14-year high of 8.7% in January, bringing the two-month average to 8.6%.

The BSP has increased rates by 425 basis points (bps) since May 2022 to tame inflation, including its 25-bp rate hike last week that brought the key rate to a near 16-year high of 6.25%.

The BSP expects inflation to return to the 2-4% target range by the fourth quarter. It sees full-year inflation at 6% before easing to 2.9% in 2024.

The nationwide survey response rate for this quarter was slightly lower at 60.6% from 61% in the previous quarter. — Keisha B. Ta-asan