Business confidence soars in Q4 2023, except for CV, Davao regions

Business.(Business File photo)

BUSINESS confidence in most regions outside the National Capital Region (NCR) is more upbeat for the fourth quarter of 2023, except for Ilocos, Central Visayas and Davao regions.

The three regions cited lower school enrollment turnout, slowdown in business activities due to fewer working days towards the end of the year, and adverse effects of the ongoing international conflicts as among the reasons for their less upbeat outlook, according to the Fourth Quarter (Q4) Business Expectation Survey (BES) released by the Bangko Sentral ng Pilipinas (BSP) on Friday, Dec. 15, 2023.

The rest of the regions cited stronger consumer demand during the holidays, sustained post-pandemic economic recovery, business expansions in the trade and financial services industries, launch of new products, and easing inflation as reasons for their continued optimism for the quarter.

The overall confidence index (CI) during the fourth quarter stood at 35.9 percent, up slightly from 35.8 percent in the third quarter of 2023.

Business owners from various industries attributed their confidence to the increase in demand for goods and services during the Christmas season, sustained economic recovery to pre-pandemic levels, business expansions in the utilities, trade, financial, and hotels and restaurant sub-sectors, development and launch of new products and services, and brisker consumer spending on the back of higher remittances and inbound holiday travelers, including overseas Filipino workers.

However, the current quarter’s CI was tempered by concerns of pessimistic firms over the negative economic impact of the ongoing conflicts in Gaza and Ukraine, elevated inflation, and higher interest rates.

The Q4 BES was conducted from Oct. 5 to Nov.14, 2023. There were 1,548 firms surveyed nationwide, consisting of 583 companies in the National Capital Region (NCR) and 965 firms in the areas outside of NCR covering all 16 regions nationwide.

The major business risks identified by the respondents for the fourth quarter were stiff domestic competition (55.7 percent of respondents), insufficient demand (35.2 percent), and high interest rates (25.5 percent).

Meanwhile, results of the survey revealed that Covid-19 is no longer viewed as a significant limiting factor to business activity.

Q1 2024 and next 12 months

Moreover, business confidence for the first quarter of 2024 was less optimistic as the overall CI fell to 38.2 percent from 53.8 percent a quarter ago.

The firms’ less upbeat outlook for the next quarter stemmed from their expectations of a decline in consumer spending typically following the holiday season, adverse effects of the Israel-Hamas conflict on supply chains, high inflation, and rising interest rates.

CIs across all regions outside the NCR were generally less upbeat except for Calabarzon. Other regions were less optimistic for the next quarter due to their concerns about the negative impact of the Israel-Hamas conflict on the economy, higher inflation, and lower consumer spending after the holiday season. Meanwhile, firms in Calabarzon were more optimistic due to their expectations of a higher rate of school enrollment, and demand for loan products.

In terms of employment and expansion outlook, results of the survey revealed that the employment outlook index for the first quarter of 2024 and the next 12 months stays positive at 19.3 percent and 29.3 percent, albeit lower than 20.1 percent and 32.3 percent in the third quarter survey results, respectively.

Meanwhile, the percentage of businesses in the industry sector with expansion plans increased to 21.2 percent for the first quarter of 2024 from 17.7 percent in the previous quarter’s survey results.

The increase in the percentage of firms with expansion plans for the next quarter was driven by the higher percentage of firms in the manufacturing sub-sector with expansion plans, which outweighed the decline in the percentage of firms with expansion plans in the electricity, gas and water, agriculture, fishery and forestry, and mining and quarrying sub-sectors.

For 2024, the employment outlook declined a bit to 29.3 percent from 32.3 percent third quarter of 2023 survey results. But businesses with expansion plans increased to 25.7 percent from 24.1 percent with expansion plans in the manufacturing sub-sector, as well as in mining and quarrying.

Moreover, businesses expect the peso to depreciate in the first quarter and may appreciate in the next 12 months. The peso-dollar rate for the first quarter may average P56.25 to a US dollar and P56.24 to a US dollar in the next 12 months. Firms expect that the inflation and the peso borrowing rates may also rise for these surveyed periods.


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