Philippines: Firms to expand, hire more workers in Q3

MANILA, Philippines — Companies are ramping up their expansion plans and hiring more workers in the third quarter after turning more optimistic in the second quarter, according to the Bangko Sentral ng Pilipinas (BSP).

Redentor Paolo Alegre Jr., senior director of the Department of Economic Research at the BSP, said that based on the results of the second quarter 2023 Business Expectations Survey (BES), the percentage of businesses in the industry sector with expansion plans for the next quarter rose to 19.8 percent from 19.1 percent in the previous quarter.

Alegre said the increase in the percentage of firms with expansion plans belonging to the electricity, gas and water, agriculture, fishery and forestry, and mining and quarrying sub-sectors outweighed the slight decline in the percentage of firms with expansion plans in the manufacturing subsector.

Likewise, he said the employment outlook index increased to 17.9 percent for the third quarter from the previous quarter’s 13.4 percent.

“The higher reading in the second quarter suggests that hiring intentions may be more favorable for the next quarter,” Alegre said.


Businesses turned more upbeat in the second quarter as the overall confidence index rose to 40 percent from 34 percent in the first quarter, reflecting the increase in the percentage of optimists and the decrease in the percentage of pessimists during the quarter.

Alegre said the optimism of businesses was due to the increase in sales and production because of stronger demand for goods and services across all sectors, continued post-pandemic recovery, fully reopened economy, easing inflation as well as the seasonal uptick in demand for certain goods and services during the dry season.

However, he said businesses are expanding less in the next 12 months as confidence in the third quarter and the next year waned, based on the latest survey.

Alegre said the percentage of industry firms with expansion plans for the next 12 months declined to 24.8 percent from 26 percent, driven by the decrease in the percentage of firms with expansion plans in the mining and quarrying and manufacturing subsectors.

Likewise, he said the employment prospects for the next 12 months may turn less favorable as the employment outlook index declined to 30 percent from 36.4 percent in the previous quarter’s survey results.

Latest data from the Philippine Statistics Authority (PSA) showed unemployment rate in the country eased to 4.5 percent in April from 4.7 percent in March.

BSP senior assistant governor Iluminada Sicat said loan disbursements by universal and commercial banks to companies have declined since January this year.

“It reflects that some of the firms also trying to be conservative in terms of borrowing, given the high interest rate environment,” Sicat said.

To tame inflation and stabilize the peso, the BSP has raised key policy rates by 425 basis points since May last year, bringing the benchmark interest rate to a 16-year high of 6.25 percent from an all-time low of two percent.

As inflation cooled and the economic expansion remained robust, the central bank has extended its prudent pause as it maintained interest rates unchanged both in May and June this year.

According to Sicat, companies will continue to be more prudent in the way they borrow considering the demand moving forward.

The survey results also showed that businesses expect that the peso borrowing and inflation rates may rise for the current quarter and the near term.