SMEs cautiously bullish on local economic prospects

MANILA, Philippines - Small and medium enterprises (SMEs), the backbone of the Philippine economy, remains cautiously optimistic on economic prospects this year, a survey conducted by the Hongkong and Shanghai Banking Corp. (HSBC) said.

Based on results polled from 300 SMEs in the Philippines, the HSBC survey showed 40 percent plan to increase their capital expenditure (capex) spending, 27 percent plan to expand their workforce, and 66 percent prefer to maintain their existing workforce.

Forty-three percent said they expect the Philippine economy to sustain its growth rate this year, while 33 percent said that it would vastly improve compared to 2009.

The survey period covered the second quarter of the year, or prior to the results of the May national elections.

“We feel that the optimism level would have improved if the survey was held in a later period,” said Junie Veloso, senior vice president of corporate banking for HSBC Philippines in a media presentation yesterday.

He said most SMEs still continue to invest, with three-fourths planning to sustain or increase capex spending as well as expand workforce in anticipation of strong demand as the global economy improves.

The survey, which is conducted on a global scale, marks the first time the Philippines was covered.

Veloso said 70 percent of those surveyed expressed a more positive outlook towards the Philippine economy in the next six months.

HSBC forecasts a five percent growth in the Philippine economy this year, slowing at a lower range of 4.5 percent to five percent in 2011.

The National Statistical Coordination Board said yesterday the country’s gross domestic product (GDP) in the first semester grew to a 22-year high of 7.9 percent. The government, however, is sticking to its growth targets of five to six percent this year, and seven to eight percent in 2011.

Meanwhile, the HSBC survey showed the confidence level of Philippine SMEs reflected the same bullish sentiment in the rest of Asia and the Pacific.

One out of five surveyed have international trade or operations with China accounting for 56 percent, unseating the United States as the top destination for Philippine products.

Thirty-three percent said that they plan to go international within the next two years, with China and the US as top destinations.

Meanwhile, SMEs said the availability of funds is the leading barrier to their growth, while the availability of skilled labor was a close second to the leading barriers.

Veloso said the poor accounting processes of SMEs is one of the reasons why they have a difficult time accessing credit for commercial banks. “It is not the lack of cash since the country’s banking system is highly liquid,” he added.

Based on HSBC’s global and regional surveys, the emerging markets ranked highest in terms of confidence. Emerging markets scored the highest at 122 while the developed nations (the United Kingdom, the US, and Europe) got 115 points.

The global survey covered 6,300 small business in 21 markets in Asia, Europe, the Middle East, North America and Latin America.