The Philippine economy enters the final quarter of 2024 with both consumers and businesses showing renewed confidence, according to the Bangko Sentral ng Pilipinas (BSP). Consumer sentiment improved as the Confidence Index (CI) climbed to -11.1 percent in Q4, up from -15.6 percent in Q3. This was the highest since the first quarter this year. This positive shift reflects greater optimism, with respondents citing higher expected incomes, more job opportunities, and additional family members joining the workforce as key contributors. Notably, confidence surged across all income groups and indicators, including expectations about the national economy, family finances, and personal income.
Looking ahead to 2025, consumers remain hopeful, with expectations for higher incomes and more job opportunities. Confidence in big-ticket item purchases also saw an uptick, signaling a willingness to spend despite lingering concerns about inflation. However, consumer confidence is tempered by ongoing challenges, including rising interest rates, a weaker peso, and higher unemployment, with inflation forecasted to remain above the government’s target at 6.2 percent for 2024-2025. Additionally, household savings declined to 25.6 percent, while the proportion of households with loans remained stable, indicating cautious financial behavior.
On the business side, the Confidence Index rose significantly to 44.5 percent in Q4 2024, up from 32.9 percent in Q3, reflecting increased optimism driven by seasonal demand and growth in key sectors. This was the highest since September 2016. Agricultural goods, infrastructure projects, and shipping services are seen as the main drivers of this improved outlook. Businesses are also encouraged by expectations of easing inflation, lower interest rates, and improved access to credit, which are contributing to stronger financial conditions and better business operations.
However, the outlook for Q1 2025 showed a slight dip in optimism, with the CI dropping to 40.3 percent. The confidence for the year ahead also slightly waned, as the CI fell to 56.4 percent from 58.0 percent in the previous quarter. Despite these moderate declines, sentiment remained strong across most sectors, particularly in trade and industry, where capacity utilization in manufacturing and construction increased to 73.9 percent from 71.9 percent in Q3.
While businesses are still wary of inflation, which is expected to average 3.6 percent in Q4 2024, the forecast remains within the government’s target of 2.0-4.0 percent. The outlook for the peso has also improved, though borrowing costs are anticipated to rise in the near future. With improved liquidity positions and easier access to credit, the business landscape shows signs of recovery as the year draws to a close.
Both consumer and business sentiment point to a cautiously optimistic view of the economy heading into 2025, despite ongoing challenges and uncertainties. The BSP’s findings suggest that stability in consumer spending and business investment could play a key role in sustaining economic growth in the coming year.
