Business confidence plunges in BSP survey
BUSINESS sentiment plunged in the third quarter, the Bangko Sentral ng Pilipinas (BSP) reported on Thursday, with consumer prices, seasonality, weak local currency and competition said to have dampened optimism.
Results of the central bank’s latest Business Expectations Survey put the third quarter confidence index (CI) — computed as the percentage of companies that answered in the affirmative minus those who replied otherwise — at 30.1 percent, down from 39.3 percent three months earlier.
In a press briefing, BSP Department of Economic Statistics Director Redentor Paolo Alegre Jr. described business sentiment as “less optimistic,” with the latest CI the lowest in almost nine years or since the 22 percent recorded in the fourth quarter of 2009.
Alegre said respondents attributed the lower confidence to increasing prices of basic commodities in the global market — augmented locally by the effects of the implementation of the Tax Reform for Acceleration and Inclusion (Train) law; rising overhead costs and lack of raw materials; seasonal factors such as business activity interruptions and lower crop production during the rainy season, slack in consumer demand as households prioritized school expenses, as well as the suspension of commercial fishing in Davao Gulf from June to August; the weakening peso; and stiffer competition.
The Train law, which took effect at the start of the year, raised taxes on fuel products, car sales and sugar-sweetened beverages, among others, in exchange for lower personal income taxes.
Just last month, inflation soared to a nine-year high of 6.4 percent, while the Philippine peso continues to trade in the P53:$1 level since falling to that level in June.
Philippine business sentiment mirrored “less buoyant” business outlook in Canada, Chile, Hong Kong, the
Netherlands, New Zealand, South Korea and the US, Alegre noted, adding that outlooks were more bullish in Australia, Brazil, Denmark, Greece, Hungary, and Mexico.
The decline in third quarter optimism was attributed largely to the wholesale and retail trade sector, which registered the biggest decline in confidence.
“Aside from the sluggish consumer demand during the rainy season, respondents’ outlook was dampened by higher input costs brought about by rising commodity prices, weakening of the peso, and increasing minimum wage requirements,” the BSP official added.
More upbeat for Q4
The outlook for the next three months, meanwhile, rose to 42.6 percent from 40.4 percent in the second quarter with respondents pointing to higher demand, increase in orders and projects, expansion of business and product lines, continued rollout of government infrastructure and other development projects, favorable weather conditions and the opening of high seas/fishing operations in October.
“Positive outlook was likewise driven by respondents’ expectations of more favorable macroeconomic conditions in the country for the next quarter — particularly robust gross domestic product growth, sustained foreign investment inflows and the steady stream of overseas Filipinos’ remittances,” Alegre pointed out.
Businesses also expect inflation to increase, the peso to depreciate, and interest rates to go up for the current and next quarters.
Alegre said inflation was expected to breach the upper end of the government’s 2.0-4.0 percent target range for 2018, at 4.7 percent for the current quarter and 4.8 percent for the next, from 3.8 percent for both periods in the previous survey.
The latest BES, which polled 1,466 companies nationwide, was conducted from July 2 to August 29, 2018. The survey results are considered indicative of the direction of overall business activity.
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