Business confidence in PH plunges to 3-year low

MANILA, Philippines – The country’s corporate managers are the most pessimistic they have been in 3 years as the rainy season starts, local currency depreciates, and conflict in Marawi City continues. But they do not expect conditions to worsen in the rest of the year, the Bangko Sentral ng Pilipinas (BSP) reported in a widely-watched survey of business sentiment.

BSP’s quarterly survey on Friday, August 25, showed that overall business confidence index for the 3rd quarter of 2017 plunged to 37.9% from 43% in the previous quarter. The survey’s main index measured the confidence of 1,480 major manufacturers.

This was the lowest percentage the BSP recorded since the 3rd quarter of 2014, when confidence index reached 34.4%. (READ: Terror in Mindanao: The Mautes of Marawi)

The BSP said some of the factors respondents cited for the less buoyant outlook are:

• seasonal factors such as slowdown of business activities during the rainy season
• slack in demand during the planting and closed milling season due to closed fishing season in Davao Gulf from July to September
• Marawi crisis and declaration of martial law in Mindanao, which affected people’s mobility to and in Mindanao
• further depreciation of Philippine peso against the greenback
• increasing consumer prices
• stiffer competition
• damages and power outages caused by the July 6, 2017 earthquake in the Visayas

BSP said the sentiment of businesses in the Philippines mirrored the less buoyant business outlook in the US, Canada, the Netherlands, New Zealand, and Thailand; but was in contrast to the more bullish views of those in Germany and Hong Kong as well as steady outlook in France.    

Better days seen

But for the rest of the year, Marriel Remulla, deputy director at the Department of Economic Statistics of the BSP, said businessmen did not anticipate further deterioration of economic growth.

The country’s gross domestic product (GDP) growth accelerated to 6.5% in the 2nd quarter from 6.4% in the 1st quarter of the year.

For the 4th quarter, Remulla said business outlook turned “more positive” as the confidence index rose to 51.3% from 42.7% in the previous quarter’s survey results.

The businessmen’s more optimistic outlook is driven by expected uptick in consumer demand because of the Christmas season and the continued roll out of infrastructure and other development projects.

Remulla said in the report that respondents cited positive impacts of the proposed tax reform program being pursued by the Department of Finance.

BSP managing director Francisco Dakila said respondents anticipate inflation to increase at 3.1% for the 3rd quarter and 3.2% in the 4th quarter, remaining within the two to 4% target set by the BSP itself.  – Rappler.com