MANILA, Philippines — Businesses turned less optimistic for the third quarter amid uncertainties during the leadership transition and continuing risks posed by the pandemic, and concerns over rising inflation.
However, consumers turned more upbeat for the third quarter on expectations of more available jobs, good governance, positive developments in the COVID situation, and higher income.
Redentor Paolo Alegre, senior director of the Department of Economic Statistics at the Bangko Sentral ng Pilipinas (BSP), said the result of the second quarter 2022 Business Expectations Survey (BES) showed the overall confidence index declined to 46.4 percent compared to a quarter-ago level of 59.7 percent.
Alegre attributed the respondents’ less optimistic outlook for the quarter to the uncertainties during the leadership transition, continuing public health risks posed by COVID, concerns over rising inflation and its impact on business operations, and the seasonal downturn in production due to weather disturbances.
Alegre said other respondent firms also cited higher production costs of automotive components, the adverse effects of the Russia-Ukraine war as well as the lockdowns in China due to COVID as reasons for their less upbeat sentiment for the third quarter.
Business sentiment was also less optimistic for the next 12 months as the overall confidence index decreased to 59.9 percent from the previous quarter’s survey result of 69.8 percent.
According to Alegre, the respondents’ less upbeat outlook for the next 12 months was due to the perceived uncertainties surrounding the transition to the new administration, the possible spike in COVID cases as well as the elevated inflation amid the increase in prices of food and raw materials on production cost.
The BSP expects inflation to breach the two to four percent target over the next two years, averaging five percent for 2022 and 4.2 percent for 2023.
Alegre said that business confidence for the next 12 months was weighed down by concerns over the inoculation targets not being met, China lockdowns, and possible stagflation due to the Russia-Ukraine conflict.
From April to June, the overall business confidence index increased to 35.4 percent from 32.9 percent with the further easing of COVID-19 restrictions and reopening of the economy, the increase in sales, and uptick in economic activities.
The country’s gross domestic product posted a faster-than-anticipated growth of 8.3 percent in the first quarter despite the surge in COVID cases due to the more contagious Omicron variant.
Businesses, Alegre said, expect the peso to further depreciate and the peso borrowing rate and inflation to rise further.
On the other hand, Alegre reported that consumer sentiment turned more upbeat for the third quarter with the overall confidence index increasing to 11.2 percent from 6.4 percent.
Likewise, he added that consumer confidence index for the next 12 months also went up to 32.4 percent from the previous quarter’s 30.4 percent.
“Survey respondents attributed their more favorable outlook in the near term to expectations of more available jobs, good governance, positive developments in the COVID situation as well as additional and high income,” Alegre said.
The consumer sentiment in the second quarter based on the second quarter 2022 Consumer Expectations Survey (CES) was also less pessimistic with the overall confidence index improving to -5.2 percent from -15.1 percent in the first quarter due to the availability of more jobs, positive developments related to the global health pandemic as well as higher earnings.
The BES was conducted from April 18 to June 1 covering a total of 1,509 companies , while the CES covered 5,437 respondents from April 25 to May 5.