Business confidence weakens in 1st quarter
By Lee C. Chipongian
The global health scare has dampened the business confidence and outlook for the first quarter this year as expected, and the less optimistic views were echoed across the region and most of the world, according to the latest Bangko Sentral ng Pilipinas (BSP) survey.
MB file photo.
The quarterly Business Expectations Survey (BES), concluded a week before the March 17 COVID- 19 lockdown of Luzon (survey conducted January 24 to March 13), showed a weaker confidence index (CI) of 22.3 percent in the first quarter this year compared to 40.2 percent in the last quarter of 2019, indicating an increased percentage number of pessimists.
The BSP said the low CI was due to feared adverse or negative effects of the virus outbreaks, African swine fever and the Taal volcano eruption. “(There were also) concerns on government policies, such as termination of Visiting Forces Agreement, non-renewal of mining rights, and travel ban, among others,” said the BSP.
The decrease in orders and lower volume of business activity and production, seasonal slack in demand after the holiday season, and low supply of raw materials and products were also listed as contributing to the less optimistic sentiment of businessmen during the quarter.
“The sentiment of businesses in the Philippines mirrored the less optimistic business outlook in Brazil, Canada, Croatia, Germany, Hungary, Israel, and the United States. Meanwhile, business confidence in Greece, India, and the Netherlands was more optimistic. However, view of businesses in Australia, Chile, China, Denmark, Euro Area, Hong Kong, Mexico, New Zealand, South Korea, and Thailand was pessimistic,” noted the BSP.
However, BES results showed that for the second quarter, the business outlook was more favorable with a CI of 42.3 percent versus 40.3 percent in the fourth quarter 2019.
This “more buoyant outlook” was due to: increase in orders or sales primarily in the community, finance, business, and trade sub-sectors; usual uptick in demand during summer, enrollment, and harvest seasons; implementation of new or enhanced business strategies; expansion of businesses; and higher government infrastructure spending.
The BES noted that businessmen expect a stronger peso and lower interest rate in the next months, while inflation is seen to be higher in the first quarter.
“The survey results showed that businesses expect the peso to appreciate, interest rate to decline, but inflation rate to increase for the current and next quarters,” said the BSP.
This is also the sentiment in the next 12 months, that the peso will continue to appreciate, and interest rate and inflation will also increase.
“Businesses expected that the rate of increase in commodity prices will remain within the government’s two to four percent inflation target range for 2020 and 2021. In particular, respondents predicted inflation to be at 2.9 percent for the first quarter 2020, three percent for the second quarter, and 3.2 percent for the next 12 months,” said the BSP.
As for the exchange rate, businesses expect the peso-dollar rate will average at P50.9:$1 for first quarter 2020, and then P51.1 for the second quarter and P51.2 for the next 12 months.
Overall, business outlook on the country’s economy was less upbeat for the next 12 months as the CI declined to 55.8 percent from 59.6 percent in the previous quarter, the BSP said.
“The less optimistic outlook of the respondents for the next 12 months was attributed to expectations of unfavorable effects of the Taal eruption and virus outbreak, and concerns on government policies,” the BSP added. These government issues include the rice tariffication law, imposition of price caps on certain medicines, and possible imposition of safeguard duties on imported vehicles.