Q3 business sentiment drops but stays positive

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Businesses have a less optimistic view of the Philippine economy for the third quarter but overall sentiment remains positive, the Bangko Sentral ng Pilipinas (BSP) reported on Friday.

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The central bank’s latest Business Expectations Survey (BES) resulted in a Confidence Index (CI) of 37.9 percent for the period, down from 43 percent three months earlier.

Survey respondents, BSP Department of Economic Statistics Deputy Director Marriel Remulla said in a briefing, cited the following reasons:
• seasonal factors such a slowdown in business activities during the rainy season, reduced demand during the planting and closed milling season, and the closed fishing season in the Davao Gulf from July to September;
• the Marawi crisis and the declaration of martial law in Mind\anao, which had affected mobility;
• the peso’s depreciation;
• higher prices;
• stiffer competition; and
• damages and power outages caused by the July 6 earthquake in the Visayas.

“The sentiment in the 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 and steady outlook in France,” Remulla added.

Upbeat for Q4
Sentiment for the next three months, on the other hand, improved to 51.3 percent from 42.7 percent during the previous survey.

The BSP attributed the increased optimism to the following:
• an expected uptick in consumer demand during the holiday, harvest and milling seasons;
• the rollout of government infrastructure and other development projects;
• continued increases in orders and projects, which would lead to higher production volumes;
• business expansion and new product lines;
• the introduction of new and enhanced business strategies and processes;
• favorable weather conditions for agriculture; and
• a positive impact from the government’s proposed tax reform program.

The latest BES, which polled 1,480 companies nationwide, was conducted from July 3 to August 18. The survey results are considered indicative of the direction of overall business activity.

The CI is computed as the percentage of firms that answered in the affirmative, minus the percentage of those that replied in the negative in a given indicator.

The Q3 BES also found that businesses were continuing to expect tighter financial conditions. At –1 percent for the quarter, this means that pessimists outnumbered optimists. Respondents, however, said their financing needs could be met by loans given easy access to credit.

Businesses also expect inflation to increase but stay within the government’s 2 to 4 percent target, the peso to continue depreciate and interest rates to go up during the current and succeeding quarters.

Specifically, the rise in consumer prices is expected to hit 3.1 percent this quarter and 3.2 percent in the next three months, compared to 2.9 percent and 3 percent, respectively, during the previous survey.

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