Business confidence plunges in Q1

MANILA, Philippines — Business confidence in the first quarter plunged to its lowest level in a decade as the coronavirus disease 2019 or COVID-19 pandemic continues to ravage the economy, according to the Bangko Sentral ng Pilipinas (BSP).

According to the BSP’s first quarter Business Expectations Survey (BES), the overall confidence index plunged to 22.3 percent in the first quarter from 40.2 percent in the fourth quarter of last year.

This was the lowest level since the 22 percent recorded in the fourth quarter of 2009 or after the global financial crisis.

However, the latest survey conducted from Jan. 24 to March 13 did not factor in the impact of the Luzon-wide enhanced community quarantine that has been extended by two more weeks to April 30.

The BSP said businesses turned less optimistic in the first quarter due to the negative effects of the pandemic, the African swine fever (ASF)) outbreak and the Taal Volcano eruption.

The respondents of the survey also cited concerns on government policies, such as the termination of Visiting Forces Agreement (VFA), non-renewal of mining rights, and travel ban.

Likewise, the central bank said businesses also noted a decrease in orders and lower volume of business activity and production, seasonal slack in demand after the holiday season as well as low supply of raw materials and products.

Sentiments of importers, dual-activity and domestic-oriented businesses were less favorable in the first quarter amid the anticipated slowdown in activities due to the COVID-19 outbreak, ASF outbreak, and the eruption of Taal Volcano in January.

Industry firms particularly manufacturing, utilities, agriculture as well as mining and quarrying were less positive from January to March on COVID-19 concerns, the BSP survey said.

In terms of financial conditions, the survey disclosed a further drop in sentiment to -12.2 percent in the first quarter from -5.4 percent in the fourth quarter, the lowest since the first quarter of 2010.

“This means that firms that expect tight financial conditions

increased and continued to outnumber those that said otherwise during the quarter. However, firms were of the view that their financing requirements could be met through available credit as more respondents reported ease of access to credit than those that said otherwise,” the BSP said.

Businesses also expect a stronger peso and lower interest rate, but higher inflation in the first quarter. Inflation averaged 2.7 percent in the first quarter after easing to 2.5 percent for the second straight month in March.

For the second quarter, the positive business outlook improved as the next quarter confidence index went up to 42.3 percent from the previous quarter’s 40.3 percent.

The BSP said the more buoyant outlook for the second quarter was associated with expectations of an increase in orders or sales primarily in the community, finance, business, and trade sub-sectors, as well as the usual uptick in demand during summer, enrollment, and harvest seasons.