BSP sees more jobs in H2 as firms expand

Despite a generally bleak economic outlook, monetary authorities expect the opening of more jobs in the next two quarters as companies push through with expansion plans already in the pipeline.

The Bangko Sentral ng Pilipinas (BSP) said the Business Expectation Survey (BES) was a reliable indicator for hiring intentions two quarters forward and the latest results showed that businesses intended to hire despite the decline in optimism.

BSP managing director Cyd Amador said they have been tracking the BES results against the actual results and hiring intention was one of the most reliable indicators of employment generation over the next two quarters.

“The survey does not pin down the actual number of jobs that will be created but when the BES indicates more hiring, the actual figure bears it out,” Amador said.

He said sustained job creation is an indication of the underlying resilience of the country’s economy despite expectations that this year’s prospects would be significantly dimmer than last year.

Business sentiments fell to the lowest level in two and a half years as the business sector braced against the looming recession in the US and the rampant increase in oil prices.

The confidence index dropped by 17 index points when executives were asked about their expected prospects in the second and third quarter of the year.

The BES indicated that the overall confidence index for the second quarter dropped from 29.9 points in the previous quarter and 46.4 points in the same quarter last year to only 12.6 points this year. 

Although the optimism level is declining, the BSP official said the planned expansion in some businesses, particularly construction, would still result in a net increase in job creation in the next two quarters.

The employment index at 11.4 percent (though lower than that in the last quarter and last year) indicated an anticipated continued hiring of additional employees in the third quarter.

The BES showed that the employment outlook continued to be favorable for the construction and services sectors (specifically hotels and restaurants, renting and business activities, transportation and financial intermediation sub-sectors), consistent with their more positive macroeconomic outlook.

The BES results also showed that businesses were wary of the risks related to the US recession; volatile and high crude oil prices; rising prices of goods (including food and especially rice) and services  (transportation  and  communication); high  input costs; petitions for wage hikes; and local political noise.

According to the BES results, the business outlook for the third quarter of the year was also less optimistic, with the confidence index at 16.6 points which was 24.4 points and 28.1 points down when compared to the levels posted last quarter and last year respectively.

The BSP said importers were by far the most optimistic sector while importer/exporters were the most grim in their outlook for the next two quarters.

There was also an increasing perception of tighter access to credit in the next two quarters, with the confidence index at its lowest level since 2007.

The BES also showed that the financial condition index—an indicator of the internal liquidity situation of firms—continued to decline. The index was down to -17.8 percent from -11.6 percent last quarter and -11 percent a year-ago.

The BSP said the drop in the index could be partly attributed to expectations of less favorable financing conditions in the second and third quarter of the year and this could adversely affect their cash position.

The BES indicated that business executives considered the high level of competition, both from domestic and foreign firms, and insufficient demand leading to low volume of sales as the key risks to business activity.