Business optimism takes a dive – survey

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Optimism among businessmen polled about the Philippine economy waned in the first quarter, though hope remained that prospects would improve in the next three months, results of the central bank’s latest Business Expectations Survey (BES) show.

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In a press briefing on Friday, the Bangko Sentral ng Pilipinas (BSP) announced that the overall confidence index (CI) in the first quarter of 2014 fell to 37.8 percent from 52.3 percent in the fourth quarter of 2013.

The drop brought the index to its lowest level in 10 quarters.

The BSP sees the new data as a still favorable indicator of Philippine business confidence, noting that the number of optimists declined but remained greater than the number of pessimists during the quarter.

CI is computed as a percentage of respondent firms that answered in the affirmative minus the percentage of firms that answered in the negative with respect to their views on a given indicator.

Respondent firms in the electricity, gas and water sub-sector pointed to the peso’s depreciation, hurting importers, and annual scheduled maintenance, bound to affect normal plant operations, as the reason for their less favorable outlook on the economy.

Manufacturers blamed lower market demand and higher raw materials prices for the decline in their confidence during the period.

In the services sector, respondents referred to the normal slowdown in business activity and moderation in consumer demand after the Christmas season as the reason for their weaker confidence in the economy.

However, for the next quarter, the survey showed the business outlook has turned “more optimistic,” with the CI up at 50.8 percent from 40.7 percent in the previous survey.

Respondents were bullish on demand during the secondary harvest season, graduation and enrolment periods and the summer season.

Companies also became more optimistic of seeing businesses regaining pace because of improved marketing strategies of companies.
Rehabilitation efforts in areas destroyed by Super Typhoon Yolanda are seen boosting public and private construction in the next quarter.

Astro del Castillo, managing director at First Grade Finance Inc., said the stock market’s bearish movement in the latter part of 2013 also influenced business confidence in the first quarter of this year.

“Internally, [business confidence may have been influenced]by the previous quarter’s bear movement, weaker project implementation by the government, especially that the PDAF [Philippine Development Assistance Fund] and other localized funds were abolished, which also reduced the flow [of economic activity],” del Castillo said.

“But moving forward, I think infrastructure and power-[related constructions]should be boosting confidence,” he added.

The BES is a quarterly survey of firms drawn at random from the Securities and Exchange Commission’s top 7,000 Corporations in 2010.

The survey was conducted from January 9 to February 24, 2014 and surveyed 1,525 firms nationwide.

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