BUSINESS optimism on the economy was steady for the second quarter of 2018, with the overall confidence index (CI) declining slightly to 39.3 percent from 39.5 percent for Q1 2018, the Bangko Sentral ng Pilipinas said Thursday.
Respondents with steady outlook noted that sustained demand and ongoing market adjustments as a result of the recently enacted Tax Reform for Acceleration and Inclusion (TRAIN) Law were to be expected for the current quarter.
Outlook remained optimistic due to the usual higher demand during summer (given the expected arrival of local and foreign tourists), enrolment and harvest periods; increase in orders and volume of production; ongoing rollout of government infrastructure projects with the “Build, Build, Build” strategy of the administration; positive view on the TRAIN Law as its revenue is expected to support infrastructure projects of the government, which may attract new investments; expansion of businesses and new product lines; and sound macroeconomic conditions.
However, there was a slight dent on optimism caused by expectations of higher consumer prices, partly due to oil price hikes, and peso depreciation.
The sentiment of businesses in the Philippines mirrored the steady business outlook in China, Chile, Mexico, Germany and the Euro Area.
For the quarter ahead, business outlook was less positive. The next quarter CI, at 40.4 percent, was lower than the 47.8 percent in the previous quarter’s survey.
Respondents cited the interruption of business activities during the rainy season; lower consumer demand as households prioritized enrolment expenses; and expectations of higher commodity prices as reasons behind their lower business confidence.
Trading firms
The outlook of businesses involved in international commodity trading turned more buoyant for the second quarter.
Among business types, exporters were the most bullish on account of better prices of export commodities in the world market, increasing orders from abroad, and anticipated increase in volume of production with the ongoing infrastructure development, as well as expected uptick in investments as an offshoot of the TRAIN Law.
Likewise, importers and domestic-oriented firms were more optimistic, as they expected that economic growth would be driven by robust consumer demand arising from seasonal factors during summer as well as the anticipated higher levels of household disposable income as the TRAIN Law takes effect. The outlook of dual-activity (both importer and exporter) firms was also more favorable.
The less favorable sentiment of the services sector weighs down overall business confidence Business sentiment for the second quarter was generally upbeat across sectors (construction, industry, and wholesale and retail trade sectors), except for the services sector, whose views were less positive.
Construction firms’ bullish outlook for the second quarter was on account of the award of new construction projects (both public and private) for 2018 and better business environment.
The employment outlook index for the next quarter remained positive across sectors, although lower compared to a quarter ago, suggesting that more firms will continue to hire new employees than those that indicated otherwise, although the number of new hires could be lower compared to the previous quarter’s survey.
The percentage of businesses with expansion plans in the industry sector for the next quarter edged lower to 34.2 percent from 35.1 percent in the previous quarter. (PR)