Business

Businesses less positive in Q3, says BSP

August 25, 2017 | 9:15am

Businesses less positive in Q3, says BSP

The Bangko Sentral ng Pilipinas said businesses are worried about the "weakening peso" and its effect on "increasing prices" of basic goods and services. Philstar.com/File photo

MANILA, Philippines — A natural disaster, martial law and the weakening peso that increase prices have made businesses less bullish about the economy this quarter, the Bangko Sentral ng Pilipinas reported on Friday.

The third quarter business confidence index declined to 37.9 percent from 43 percent in the previous three months.

While the positive reading still shows that optimists outnumber pessimists, the drop meant that their number has dropped. CI is measured as a proportion of those who answered positively against those with negative views.

CI is measured every quarter by the central bank through a nationwide survey. This edition covered 1,480 firms surveyed from July 3 to August 18.

Aside from seasonal weakness in businesses during rainy season, the BSP said respondents cited the "Marawi crisis and the declaration of martial law in Mindanao, which affected people's mobility" in the area.

Martial law will be in effect until the end of the year, supposing President Rodrigo Duterte does not ask for another extension from Congress. The order has been in place since May 23.

In addition, the central bank said businesses are worried about the "weakening peso" and its effect on "increasing prices" of basic goods and services.

The peso has plummeted near its 11-year-low at about 51 to a dollar this month. It closed at 51.08 on Friday, weaker by 8 centavos from Thursday.

BSP Governor Nestor Espenilla Jr. has said that the depreciating peso is not a cause for concern as this reflects rising capital imports for the government's infrastructure program.

That however did not bode well with Friday's survey results that showed construction firms having a "less favorable" outlook for the third quarter as rains are expected to slowdown construction.

Across all businesses, the central bank said less positive outlook was also affected by stiffer competition and damages and power outages as a result of the magnitude 6.5 earthquake in Leyte last July.

The natural disaster left at least two people dead.

The bleaker economic outlook also prompted businesses to hold back expansion plans, BSP said.

A total of 32.8 percent of respondents in the industry sector said they have plans to expand their businesses this quarter, down from 34.6 percent in the second quarter.

"Meanwhile, the average capacity utilization for (the third quarter) was slightly higher..., indicating sustained volume of business activity for the current quarter," BSP said in a statement.

Going forward, businesses have turned more positive with the CI rising to 51.3 from 42.7 percent.

This was attributed to the seasonal rise in consumer demand during the holidays that may boost profits, continued state infrastructure roll-out, the passage of the first tax reform bill and good weather conditions.