Business optimism sinks to 2-year low

MANILA, Philippines — Business optimism in the Philippines sank to its lowest level in two years during the first quarter, dragging down the country’s rank from fourth most optimistic out of 36 economies in the fourth quarter of 2017 to 12th this year.

The latest Grant Thornton International Business Report showed Filipino business executives turned less bullish in the first three months of the year, with the optimism level plummeting to 74 percent from a record high 98 percent in the same period last year and 86 percent in the fourth quarter of 2017.

The first quarter business optimism level was also the lowest since the 56 percent mark in the first quarter of 2016.

P&A Grant Thornton said the drop in the Philippines’ business optimism level was in contrast to those of its Southeast Asian neighbors, and could be attributed to a decline in profitability, investment and employment expectations.

Profitability expectations over the next 12 months among the country’s business executives plunged to 76 percent in the first quarter from 86 percent the previous quarter, while revenue expectations likewise dipped to 80 percent from 88 percent in the fourth quarter of 2017.

Less businesses are also likely to invest in new buildings and plant and machinery in the next 12 months, the report showed.

Despite the drop in overall optimism, however, businessmen in the country still ranked as the third most optimistic in Asia in the first quarter behind those from Indonesia (98 percent) and India (89 percent). 

“Both regulations and red tape and information and communications technology infrastructure are less seen as hurdles to doing business in the country. Business expect an increase in their selling prices as well. Lastly, energy costs and transport infrastructure are also seen as less of a constraint to conducting business. As a result, more than half of the businesses surveyed foresee an increased investment in marketing efforts, as well as in salesforce effectiveness,” P&A Grant Thornton said.

Globally, Indonesia, Finland and Austria were all tied as having highest business optimism level during the first quarter, followed by Netherland (90 percent), US (89 percent) and India (89 percent).

“The drop in optimism across Asia Pacific contrasts with most other global regions. It is striking that the major contributors to this dip are China and Japan. That said, their confidence levels still compare favorably with those in recent years,” P&A Grant Thornton chair and CEO Marivic Españo said.

“In Japan, a strengthening yen will have dampened the mood somewhat. In China, the continued rebalancing of its economy, along with tough trade rhetoric with the US, are likely contributing factors. ASEAN businesses, on the other hand, are buoyant. The continued transfer of low-cost manufacturing sectors from China to neighboring countries is driving business confidence,” Españo added.