Mixed Economic Sentiments: Businesses Cautious Consumers Slightly More Optimistic in Q1 2024

The first quarter of 2024 has seen diverging sentiments in the Philippine economy, with businesses expressing increased caution and consumers showing a slight improvement in outlook, according to recent surveys conducted by the Bangko Sentral ng Pilipinas (BSP).

The Business Expectation Survey (BES) revealed that business confidence dipped to a confidence index (CI) of 33.1% from 35.9% in the previous quarter. This downturn is attributed to a combination of factors including a post-holiday decline in demand, persistent inflationary pressures due to high food and oil prices, stiff competition, and the adverse impacts of a strong El Niño event on the agriculture sector. Additionally, businesses are bracing for tighter cash flows as the financial condition index remained negative, reflecting ongoing liquidity challenges.

In stark contrast, the Consumer Expectation Survey showed an uptick in consumer confidence, improving to -10.9% from -19%. Despite remaining pessimistic overall, consumers noted fewer negative sentiments compared to the previous quarter. This improvement was largely credited to factors such as increased income, more available jobs, and an increase in working family members.

Despite these positive consumer indicators, concerns remain. Households anticipate higher inflation rates and potential currency depreciation against the US dollar. Inflation expectations are particularly worrying, with consumers expecting an average inflation rate of 5.3% over the next 12 months, significantly above the government’s target range of 2% to 4%.

Both surveys highlight significant economic challenges and opportunities within the Philippines as businesses navigate persistent market and environmental hurdles while consumers gradually adjust to improving but still cautious economic conditions.