MANILA, Philippines — Companies are seen hiring fewer new workers in the first quarter next year due to elevated inflation that translated to higher interest rates as well as the expected business slowdown after the Christmas season.
Redentor Paolo Alegre, head of the Department of Economic Statistics (DES) at the Bangko Sentral ng Pilipinas (BSP), said the result of the Business Expectation Survey for the fourth quarter 2018 showed the employment outlook index for the next quarter dropped to 21.8 percent from the previous quarter’s 26.3 percent.
“This suggests that more firms will continue to hire new employees than those that said otherwise, although the number of new hires could decrease compared to the previous quarter’s survey,” Alegre said.
He added employment prospects were expected to moderate across sectors.
The volume of business activity index for the first quarter of next year plunged to 31.7 percent from 48.2 percent in the previous quarter.
Moreover, Alegre said the percentage of businesses with expansion plans in the industry sector for the first quarter declined slightly to 36 percent from 36.1 percent a quarter ago.
Among the sub-sectors, manufacturing and mining and quarrying recorded stronger expansion plans, while those of the electricity, gas and water and agriculture, fishery and forestry were lower from a quarter ago.
Alegre said respondents of the quarterly survey expected the bullish business conditions to continue for the first quarter of 2019 as the overall business confidence index plunged to a near-decade low of 29.4 percent from 42.6 percent in the previous quarter.
“Respondents attributed their weaker outlook for Q1 2019 to the usual slowdown in consumer demand after the holiday season. Moreover, sentiment of firms was tempered by expectations of a peso depreciation, which increases the costs of imports, as well as higher inflation and interest rates,” he added.
Business sentiment across sectors was generally less optimistic for the fourth quarter and first quarter of next year.
Across sectors, firms’ outlook was adversely affected by rising commodity prices both in the domestic and global markets.
Industry firms cited the volatility of global oil prices, higher importation costs due to peso depreciation, and shortage of supply of raw materials as reasons for their less positive outlook.
Alegre said firms involved in mining and quarrying turned pessimistic, mainly as a result of the moratorium on new large-scale mining projects and the closure of several mining pits.
“Despite expectations of continued government spending on infrastructure projects, construction firms were less upbeat for Q4 2018 as they await the results of the bidding process of government projects,” he said.
Moreover, he added construction firms also noted higher production costs and interest rates as factors that may adversely affect their business operations.