Holiday cheer, better global outlook fuel rise in business confidence in Q4 – BSP

November 29, 2017 - 1:59 AM
A 45-foot tall Christmas tree with the 'Enchanted Princess' theme adorns the main lobby of a mall. Expectations of robust spending for the holidays boosted business confidence for the last quarters, said a central bank survey. FILE PHOTO BY BERNARD TESTA, INTERAKSYON

MANILA – Businesses turned more optimistic in the last three months of the year amid expectations of increased purchases for Christmas and improving global conditions that will fuel stronger exports, the central bank reported Tuesday (Nov. 28). It noted that generally better readings in its latest survey could signal that overall economic growth may beat the pace of the first three quarters.

Results of the Bangko Sentral ng Pilipinas’ (BSP) fourth-quarter Business Expectations Survey showed 43.3% of respondents bullish about economic prospects this quarter, picking up from the 37.9% confidence index (CI) reading in the July-September survey round. It was also the best reading since a 45.4% net score in the third quarter of 2016, according to central bank data.

The CI is computed as the percentage of firms that answered in the affirmative less those that replied in the negative when asked on a given indicator. A positive CI indicates a favorable view, except for the questions on inflation rate and the peso borrowing rate, where a positive CI indicates the opposite, the BSP explained.

The survey covered 1,473 firms nationwide on Oct. 2-Nov. 20, with respondents drawn from the combined list of the Securities and Exchange Commission’s Top 7,000 Corporations in 2010 andBusinessWorld’s Top 1,000 Corporations in the Philippines in 2015.

The BSP noted in a summary of findings that respondents grew more upbeat about the Philippine economy this quarter as they expect the Christmas season to inspire increased orders and consumer purchases, following a trend observed in the past years.

The companies also cited expectations of more business expansion, bigger state spending on infrastructure and development projects, and favorable macroeconomic conditions for their more optimistic views.

Sentiment improved across businesses nationwide, with a bigger jump in the net score for Metro Manila-based firms at 44.2% from the third quarter’s 37%, compared to those in the provinces, whose confidence index readings improved to 41.8% from 39.7% the previous quarter.

A recovery in global economic activity is also expected to boost demand for Philippine products.

Exporters were the “most bullish” among business categories, posting a record-high 50% confidence level, said
Rosabel B. Guerrero, director at the BSP’s Department of Economic Statistics.

Importers also grew more upbeat for the fourth quarter with a 43.8% net score, while domestic-oriented firms posted a 49.6% confidence index.

Across industries, business optimism is highest among services at 50.6%, followed by wholesale and retail trading firms at 50.1%. In particular, those engaged in the hotel and restaurant sector expect increased activity amid the festivities, Ms. Guerrero said.

On the flip side, industrial and construction firms grew less upbeat about business prospects for the quarter, the BSP said. Manufacturing, mining and quarrying companies dragged sentiment down, against otherwise optimistic views from firms in the agriculture, fishery and forestry and electricity, gas and water supply sub-sectors.

BSP Deputy Governor Diwa C. Guinigundo said the survey results had strong correlation with gross domestic product (GDP) growth, noting that the improved sentiment could signal even greater economic activity this quarter.

“Theoretically, the fourth quarter real GDP can be higher than the third quarter,” Mr. Guinigundo said during yesterday’s briefing.

If realized, Philippine GDP could touch 7.0% this quarter, coming from a 6.9% reading last July-September, as well as 6.4% and 6.7% in the first and second quarters, respectively.

Firms generally expect commodity prices to pick up further but remain within the BSP’s 2-4% target band. The peso is likewise expected to depreciate further, while interest rates are seen trending higher. Still, companies expect to have easy access to credit.


At the same time, business confidence slipped for the first quarter of 2018, tracking a usual decline as companies expect a slowdown in demand following a surge over the holidays.

A seasonal lag in business transactions at the start of a new year as well as concerns about higher excise taxes seen kicking in as 2018 opens also drove sentiment down to 39.7% from 51.3% previously, although still better than the 34.5% “next quarter” reading of 2016’s final quarter.

Construction firms, however, grew more bullish towards the next quarter as they expect to take on new projects from both the government and private sector.

Fewer firms also said they will hire more workers next quarter as the number of businesses with expansion plans slipped.