Businesses less optimistic in Q1

BUSINESSES in the Philippines turned less optimistic in the first quarter this year.

In a survey conducted by the Bangko Sentral ng Pilipinas (BSP), the respondent firms’ less upbeat quarter-on-quarter outlook was due primarily to the usual slowdown in business activity and moderation of consumer demand after the holiday and harvest seasons.

Other factors include rising fuel prices that are largely influenced by higher international prices of crude oil and the increase in excise tax on petroleum products, and stiffer competition.

Likewise, results of the survey revealed concerns over the transitory impact on consumer prices with the implementation of the Tax Reform for Acceleration and Inclusion (Train) Law may have contributed to the lower outlook, although a significant number of businesses surveyed also mentioned about the positive impact of the tax reform.

The decline in business sentiment for the first quarter is credited largely to the wholesale and retail trade sector. Meanwhile, construction firms reported an upbeat outlook due mainly to expectations of new construction projects (both public and private) to be awarded in 2018.

The sentiment of businesses in the Philippines mirrored the less favorable business outlook in the US, Canada, China, Hong Kong and South Korea, but was in contrast to the more bullish views of those in the UK, Australia, France, Germany, Netherlands and Thailand.

The first quarter Business Expectation Survey was conducted during Jan. 8 to Feb. 22 this year. It surveyed 1,469 firms nationwide.

Meanwhile, outlook for the second quarter improved, with the confidence index rising to 47.8 percent from 39.7 percent in the last quarter’s survey.

The BSP said this suggests that economic growth could accelerate for the next quarter.

Respondents cited the usual increase in demand during summer, enrolment and harvest periods, as well as the anticipated higher levels of household disposable income as the Train Law takes into effect as one of the reasons behind their optimism.

Respondent firms also expect an increase in government infrastructure spending with the “Build, Build, Build” strategy of the administration and higher tax revenues due to the Train Law, expansion of businesses, new projects and investment opportunities, and continued product development, new product lines, and enhanced marketing strategies.

Moreover, employment outlook index for the next quarter increased to 29.9 percent from 24.7 percent in the last quarter’s survey. This indicates that the number of firms with hiring intentions increased relative to a quarter ago.

The survey results also showed that businesses anticipate inflation to increase but to remain within target, the peso to depreciate, and interest rates to go up for the current and next quarters.

Businesses anticipate the rate of increase in prices of consumer goods and services to stay within the government’s two to four percent inflation target range for 2018, at 3.4 percent for the first quarter of 2018 and 3.5 percent for the second quarter this year.
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