Business confidence rises in Q4

MANILA, Philippines - Business confidence rose in the fourth quarter, boosted largely by favorable macroeconomic conditions and higher consumer demand during the Christmas season.

According to the Bangko Sentral ng Pilipinas’ latest Business Expectations Survey, the business confidence index improved to 52.3 percent in the fourth quarter – better than the 42.8 percent in the previous quarter.

The latest figure was also higher than the 49.5 percent recorded in the same quarter last year.

“Despite the recent looming concerns over the pork barrel issue, the US government shutdown last October and the impact of natural calamities, the business outlook for the Philippines is on course to remain positive for the final quarter of the year,” Teresita B. Deveza, deputy director at the BSP’s Department of Economic Statistics, said in a briefing.

The more optimistic outlook was amid an expected rise in consumer demand during the Christmas and palay harvest seasons, expected increase in orders and projects leading to higher volume of production, and sustained demand for construction projects, buoyed by rehabilitation efforts following the 7.2-magnitude earthquake in the Visayas.

“The favorable macroeconomic conditions in the country, particularly low inflation and interest rates, a strong peso, higher foreign investment inflows and the steady stream of overseas Filipinos’ remittances also boosted business confidence in the current quarter,” Deveza said.

The sentiment of local firms mirrored the same upbeat outlook of those in Hong Kong, India, Singapore, New Zealand and the United Kingdom.

For the first quarter next year, optimism among local businesses waned to 40.7 percent, Deveza said.

“Respondents attributed their less sanguine outlook to the seasonal slack in demand after the holiday season and the political noise brought about by the pork barrel issue,” Deveza said.

“Uncertainties in the global economy, particularly emanating from the US as well as euro markets contributed to respondents’ lower optimism,” she continued.

Across sectors, the wholesale and retail trade sector was the most bullish in the fourth quarter, the survey showed. The sector cited expected pick-up in demand due to the Christmas season, as consumption is expected to be driven by a favorable business environment and steady inflows of remittances.

The services sector also had a more upbeat outlook during the quarter due to expected brisker business due to the holiday season.

At the same time, financial services are looking forward to increased demand for credit from overseas Filipino workers and business process outsourcing firms.

But the industry sector had a weaker outlook during the quarter, specifically the mining and quarrying companies due to volatile metal prices.

Deveza noted domestic competition and weak demand are the major risks in the last quarter identified by local firms.

“The major business constraints identified by respondents in the fourth quarter were domestic competition ad insufficient demand leading to low sales volume,” Deveza said.

“However, the percentage of businesses that identified the above-mentioned constraints continued to show a declining trend. The easing of these business constraints could indicate that business conditions are improving,” she continued.

Businesses expect the inflation rate to settle at 2.9 percent in the fourth quarter and to rise to three percent in the first quarter of 2014.

“This is consisted with inflation expectations based on forecast surveys of the private sector economists by the BSP and by Consensus Economics, indicating that inflation expectations continue to be benign and within the three to five percent target range in 2013 to 2014,” Deveza said.