Business sentiment bullish after Duterte victory

MANILA, Philippines - Business sentiment turned bullish in the second quarter after the landslide victory of Rodrigo Duterte in the presidential elections, results of a survey conducted by the Bangko Sentral ng Pilipinas (BSP) showed.

BSP deputy governor Diwa Guinigundo said the overall confidence index based on the Business Expectation Survey (BES) improved to 48.7 percent in the second quarter from 41.9 percent in the first quarter.

He pointed out at the time the survey was conducted from April 1 to May 17, respondents had already factored in the results of the May 9 polls.

“It is very difficult to say that but I think the numbers will show that the survey was taken from April 1 to May 17 so the election results are already clear that Duterte was a clear winner of the presidential elections,” Guinigundo said.

He explained the overall confidence index for the second quarter normally picks up during election years. The confidence index is the percentage of firms that answered in the affirmative less the percentage of firms that answered in the negative.

The confidence index rose to 43.9 percent in the second quarter from 39.1 percent in the first quarter during the 2010 presidential elections and to a high of 54.9 percent from 41.5 percent during the 2013 senatorial and local elections.

“We saw that the readings of business expectations continue to be very bullish for the second quarter,” Guinigundo added.

Incoming finance secretary Carlos Dominguez III presented the eight-point economic agenda of the Duterte administration last May 12.

“The eight-point program would have been perused by the business respondents and the first point is precisely to continue with macroeconomic policies and to make sure that tax reforms will be pursued,” he said.

Rosabel Guerrero, director of the BSP’s Department of Economic Statistics, said respondents were more upbeat in the second quarter due to election related spending in the run-up to the May 9 polls and the sustained increase in orders and projects leading to higher volume of production.

The respondents, she added, also cited the anticipated demand during the summer with the influx of foreign and local tourists.

She explained the bullish sentiment was also caused by the introduction of new and enhanced business strategies, the expansion of businesses and product lines, the improving conditions in the local economy as well as some advanced economies, particularly in Asia.

“Their more positive outlook was further driven by expectations of more favorable macroeconomic conditions in the country, particularly low inflation and stable interest rates as well as sustained foreign investment inflows,” she said.

Guerrero pointed out business sentiment in the Philippines mirrored the improving business outlook in South Korea, Canada, France and the Netherlands but was in contrast to the deteriorating views of those in the US, the United Kingdom, Germany, China and Australia.

For the third quarter, she said business optimism remains higher, although the outcome was lower with the confidence index declining to 45.3 percent from 49.6 percent due to the rainy season, lower consumer demand as households prioritize enrollment expenses, and expectations of higher oil prices.

Guinigundo said the business respondents are very clear that they are less bullish or optimistic for the third quarter due to the rainy season, enrollment and higher oil prices and not because of the incoming Duterte administration.

“We can say that business respondents are prepared to see how the new administration, the new political leadership will navigate the economic and financial waters and we hope that this is going to continue,” he added.

The country’s gross domestic product (GDP) growth accelerated to 6.9 percent in the first quarter of the year from the revised 6.5 percent in the fourth quarter, making it the fastest growing economy in Asia.

The country’s GDP has registered a positive growth for the past 69 straight quarters.

Economic managers have penciled a GDP growth of between 6.8 and 7.8 percent this year after slowing down to 5.9 percent last year from 6.1 percent in 2014 due to weak global demand and lack of government spending.