Firms brace for cautious hiring, expansion plans

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December 21, 2025 | 12:00am

In early 2026

MANILA, Philippines — Businesses expect to enter the first quarter of 2026 with more cautious hiring and expansion plans amid tighter financial conditions, while households remain hesitant to spend on big-ticket items, the Bangko Sentral ng Pilipinas (BSP) said.

Results of the fourth quarter 2025 Business Expectations Survey (BES) showed that while firms may continue to hire in early 2026, the pace is expected to moderate.

The employment outlook index for the first quarter of 2026 declined to 12.2 percent from 18.5 percent in the previous survey round, indicating slower but still positive hiring momentum.

In contrast, hiring intentions over the next 12 months remained broadly stable. The employment outlook index for the year ahead was virtually unchanged at 26.3 percent from 26.2 percent, suggesting that firms continue to expect net employment gains beyond the near term.

The BSP noted that earlier BES results, which pointed to stronger hiring in late 2025, were consistent with the October 2025 Labor Force Survey of the Philippine Statistics Authority, which showed a marginal increase in the employment rate compared to July.

Expansion plans in the industry sector also softened heading into 2026. For the first quarter, the share of firms planning to expand declined to 13.6 percent from 16.1 percent, while expansion plans over the next 12 months fell to 15.4 percent from 19.9 percent.

All industry sub-sectors reported lower shares of firms intending to expand during both reference periods, except for the mining and quarrying sector, which posted an increase.

Underlying the more cautious outlook is an expectation of tighter financial conditions. Survey results showed that the financial condition index turned more negative to -18.4 percent in the fourth quarter of 2025 from -17.2 percent in the previous quarter.

Access to credit also deteriorated, as the credit access index fell to -2.3 percent from -0.5 percent.

The BSP noted, however, that results of the third quarter 2025 Senior Bank Loan Officers’ Survey indicated that a higher percentage of banks expect lending standards for businesses to remain unchanged in the fourth quarter, suggesting no further tightening in bank credit conditions.

Firms also identified key constraints that may weigh on activity going into 2026. Stiff domestic competition topped the list of business risks, cited by 63.7 percent of respondents, followed by insufficient demand at 34.7 percent and high interest rates at 21.7 percent.

The central bank said the share of firms citing high interest rates as a significant constraint may continue to decline as the cumulative 175-basis-point policy rate cuts work their way through the economy and ease borrowing costs.

Despite tighter conditions, firms’ inflation expectations remain well anchored. Businesses expect inflation to average 2.4 percent in the first quarter of 2026 and 2.5 percent over the next 12 months, within the government’s two to four percent target range.

On the household side, the Consumer Expectations Survey pointed to continued caution among consumers as 2026 approaches.

Buying sentiment for big-ticket items remained deeply pessimistic in the fourth quarter of 2025, with the confidence index declining to -66.2 percent from -59.3 percent in the previous quarter. Sentiment was weakest for motor vehicles, followed by consumer durables and house and lot purchases.

Buying intentions over the next 12 months also turned more pessimistic, with the index falling to -70.1 percent from -68.2 percent. Sentiment weakened across most categories and remained pessimistic in both the National Capital Region and areas outside the NCR.

Still, a slightly higher proportion of households plan to acquire real property over the next 12 months, rising to 6.2 percent from 5.6 percent. Most prospective buyers preferred lower-priced properties, with 53.5 percent indicating a preference for units valued at P450,000 or less.

Consumers also expect economic conditions to become more challenging in the early part of 2026. Households anticipate higher interest rates, peso depreciation and an increase in unemployment in the first quarter and over the next 12 months.

Inflation expectations likewise edged up for the near term and the year ahead, driven by higher food and grocery prices, concerns over the effectiveness of government programs in addressing price pressures, tighter supply of basic commodities and the impact of adverse weather conditions.

However, consumers’ year-ahead inflation forecast remained unchanged at 2.6 percent for the fourth consecutive quarter, staying within the government’s target range and indicating that household inflation expectations remain well anchored.