Business confidence declines for Q4 2018 and Q1 2019

BUSINESS outlook on the economy turned less optimistic for the fourth quarter of 2018, with the overall confidence index (CI) declining to 27.2 percent from 30.1 percent in the third quarter of 2018, the lowest level since the first quarter of 2010.

This means that the number of optimists declined, but continued to be greater than the number of pessimists during the quarter, the Bangko Sentral ng Pilipinas (BSP) said.

Despite the expected uptick in demand during the Christmas season, business outlook was less buoyant for the current quarter due to higher inflation driven by rising raw material costs and global oil prices, weakening peso, higher interest rates (i.e., borrowing costs), decrease in volume of sales and orders, and the lack of supply of raw materials.

The sentiment of businesses in the Philippines mirrored the less buoyant business outlook in the US, UK, Australia, France, Hong Kong, South Korea and Thailand. However, business sentiments in Canada, Brazil, Hungary, and the Netherlands were more upbeat.

Moreover, the Respondents expected the less bullish business conditions to continue for the quarter ahead in 2019 as the index remained positive, but lower at 29.4 percent from 42.6 percent in the previous quarter. Respondents attributed their weaker outlook for for the first quarter of 2019 to the usual slowdown in consumer demand after the holiday season. Moreover, sentiment of firms was tempered by expectations of a peso depreciation, which increases the costs of imports, as well as higher inflation and interest rates. PR