Business confidence steady in Q1 2017- BSP

Business optimism on the Philippine economy in the first quarter of 2017 was broadly stable, the results of the Business Expectations Survey administered by the Bangko Sentral ng Pilipinas (BSP) showed. 

As measured by the overall confidence index (CI), the number of optimists in the economy declined slightly at 39.4 percent from 39.8 percent in Q4 2016. 

The current quarter’s relatively steady outlook stemmed from the counterbalancing of the number of respondents that reported more positive views on the economy with those that indicated that they were negatively affected by (a) usual slowdown in business activity and moderation of consumer demand after the holiday and harvest seasons, (b) start of implementation of new business strategies for the year, (c) rising oil prices and higher cost of raw materials, and (d) wait-and-see attitude of investors with regard to the economic policy of the Trump administration, which could affect companies involved in business process outsourcing (BPOs). Likewise, sentiment of firms was tempered by expectations of a peso depreciation (which increases costs of imports) and relatively higher inflation and interest rates.

The sentiment of businesses in the Philippines mirrored the steady business outlook in France and the Euro Area. Meanwhile, a less optimistic outlook was registered by businesses in China, Hong Kong SAR, Thailand, Canada and Germany while more buoyant views were reported by those in the US, UK, South Korea and Netherlands.

For the next quarter (Q2 2017), business outlook improved, with the CI rising to 47.2 percent from 34.5 percent in the last quarter’s survey. The next quarter CI suggests that economic growth could accelerate for the next quarter. Respondents cited the following factors as reasons behind their more optimistic outlook: (a) anticipated increase in demand during summer (due to the expected influx of a greater number of local and foreign tourists), enrollment and harvest periods, (b) sustained increase in orders and projects leading to higher volume of production,  (c) expansion of businesses and new product lines (d) introduction of new and enhanced business strategies and processes, (e) continued infrastructure projects and government spending, and (f) confidence in the administration.