Local firms in expansion mode - BSP

MANILA, Philippines - A survey conducted by the Bangko Sentral ng Pilipinas (BSP) showed that more and more companies are planning to expand their operations and hire more workers in the Philippines this year after the country posted its strongest economic growth in 34 years last year.

BSP director for Department of Economic Statistics Rosabel Guerrero said about one third of the respondents of the Business Expectations Survey (BES) for the first quarter 2011 indicated plans to expand their operations starting the second quarter of the year.

“Consistent with the more positive outlook of the industry sector about their own operations, more firms or 33.9 percent of the respondents indicated expansion plans for the second quarter this year,” Guerrero stressed.

This was higher than the previous quarter’s survey wherein only 25.7 percent of the total respondents signified their intention to increase their presence in the Philippines .

She pointed out that expansion plans were noted across all sub-sectors wherein mining and quarrying continued to record the highest expansion plans with 47.3 percent followed by agriculture, fishery, and forestry with 45.3 percent; electricity, gas, and water with 38.5 percent; and the manufacturing sub-sectors with 32.5 percent.

Guerrero said the respondents reported an average capacity utilization of 75.3 percent in the first quarter of the year or the highest since the 74.8 percent utilization booked in the third quarter of 2008.

She explained that the results of the BSP survey were consistent with the Monthly Integrated Survey of Selected Industries (MISSI) of the National Statistics Office (NSO) that showed an increasing trend for capacity utilization.

On the other hand, she added that the Employment Outlook Index of the survey improved to 23 percent in the first quarter of the year from 21.1 percent in the fourth quarter of last year and from 22 percent in the same quarter last year.

“Another indicator supporting expectations of sustained growth in 2011 was the employment outlook index for the next quarter, which improved further from the levels in the previous quarter and a year ago,” she said.

The BSP official said the employment indices of the construction, services and industry sectors went up quarter-on-quarter and year-on-year.

Latest data from the NSO showed that the unemployment rate worsened to 7.1 percent in October from 6.9 percent in July last year.

Furthermore, Guerrero added that business constraints identified by the respondents of the survey include competition, weak demand leading to low sales volume, and financial problems.

“Competition, weak demand, and financial problems remain the major risks to business,” she added.

The country’s economic output as measured by the gross domestic product (GDP) posted its strongest growth since 1976 after it expanded by 7.3 percent last year exceeding the revised growth target of five percent to six percent.

The Philippines barely escaped recession after its GDP growth slackened to 1.1 percent in 2009 from 3.8 percent in 2008 due to the full impact of the global financial crisis.

The survey showed that businessmen expect a more buoyant economy this year as business optimism hit a new all-time high of 59.4 percent for the next quarter after a slight dip to 47.5 percent in the current quarter due to the usual slowdown in business activity after the Christmas and harvest seasons.

The confidence index reached a new all-time high in the next quarter due to the government’s plans to undertake big-ticket infrastructure projects under the Aquino administration’s public-private partnership (PPP) program and at the same time front-loan infrastructure and social spending.

The upbeat outlook of the survey respondents was also traced to the faster recovery in emerging and developing economies, steady stream of remittances from overseas Filipinos and foreign capital as well as the continued recovery of merchandise exports and strong confidence in the Aquino government.