MANILA, Philippines - An increase in orders and higher consumer demand are two of the main reasons behind the improvement in business sentiment in the last quarter of the year, according to a report of the Bangko Sentral ng Pilipinas (BSP) on Thursday, November 22.

The BSP said business confidence improved in the 4th quarter, with the overall confidence index increasing to 49.5%. This is higher by 7 percentage points than the 42.5% recorded in the 3rd quarter.

Businessmen cited the following reasons for the increase:

• increase in orders and start of new projects leading to higher volume of production;
• expected increase in consumer demand during the Christmas and palay harvest seasons;
• expansion of businesses and new product lines;
• favorable macroeconomic conditions in the country, particularly low ininflation and interest rates, higher foreign investment inflows and the steady stream of overseas Filipino's remittances;
• introduction of new and enhanced business strategies;
• possible further credit rating upgrade for the Philippines; and
• continued confidence in the administration.

"The sentiment of businesses in the Philippines mirrored the improved business outlook in China and India, and was in contrast to the unchanged or less buoyant sentiment in neighboring countries such as Singapore, Korea, Hong Kong SAR, and New Zealand," the BSP said.

However, the outlook for the first quarter of 2013 is sour. The BSP said this is because of the usual slack in demand after the holidays. Data showed the confidence outlook index for the first quarter next year declined to 43.8%.

"Respondents attributed their less sanguine outlook to the seasonal slack in demand after the holiday season. Other reasons cited by firms were the lack of supply of raw materials and low sugar prices in the world market that affected the sentiment in the industrial sector," the BSP said.

Exporters, importers most optimistic

The country's exporters and importers are the most optimistic among all businessmen.

Importers draw their optimism from expected strong consumer demand throughout the holiday season. Exporters, on the other hand, are optimistic because of improved investor confidence and the introduction of new products in the market.

However, some dual-activity companies such as those involved in both importing and exporting activities are less optimistic. This is largely due to the lack of supply of raw materials and the ban on the use of plastic bags.

Another reason is the ban on fishing sardines, herrings, and mackerel in the Visayas and Zamboanga peninsula.

"For the quarter ahead, the outlook of firms across all trade groups declined, following the overall trend," BSP said.

Expectations

The BSP said firms have certain expectations on various indicators in the 4th quarter of the year.

Data showed firms expect:

• Easier access to credit and better financial conditions;
• A positive enployment outlook;
• Lower interest rates; and
• More firms will expand.

Meanwhile, some firms expect a stronger peso and higher inflation, brought about by the strong inflow of remittances from overseas. - Rappler.com