Firms seen holding off expansion plans  

MANILA, Philippines — Businesses are putting on hold their expansion plans amid the continued depreciation of the peso against the dollar as well as accelerating inflation, but are planning to hire more workers in the third quarter, according to the results of a survey conducted by the Bangko Sentral ng Pilipinas.

BSP senior director Redentor Paolo Alegre said the latest Business Expectations Survey (BES) showed that the percentage of businesses in the industry sector with expansion plans for the third quarter   declined to 17.9 percent from 20.8 percent in the previous quarter’s survey results.

Alegre said the percentage of industry firms with expansion plans for the next 12 months also decreased to 24.4 percent from 25.6 percent.

The average capacity utilization of the industry and construction sectors in the second quarter increased to 72.7 percent from 70.2 percent in the first quarter.

In particular, the average capacity utilization of the industry sector increased to 71.8 percent from 69.4 percent in the first quarter.

For the third quarter, the percentage of firms in the manufacturing and the electricity, gas and water sub-sectors that reported expansion plans decreased, while that of firms in the mining and quarrying with expansion plans increased, and that of the agriculture, fishery and forestry sub-sector was steady.

For the next 12 months, the percentage of firms in the manufacturing sub-sector with the intention of expanding business operations declined.

Conversely, the percentage of firms in the mining and quarrying and the agriculture, fishery and forestry subsectors with the intention of expanding business operations within the next 12 months rose, while that of the utilities sub-sector was steady.

The survey showed that the employment outlook index was steady at 25.4 percent from 24.7 percent and increased to 30.7 percent from 28.9 percent for the next 12 months.

“The higher positive readings for the third quarter and the next 12 months suggest that firms are looking forward to hiring more people in the next quarter and the next several months,” Alegre said.

Alegre said the major business risks identified by the respondents include stiff competition and insufficient demand due to the global health crisis.

“Majority of the respondents also indicated that the adverse effects of the ongoing pandemic will continue to weigh on their business activity,” Alegre said.

Furthermore, Alegre said  businesses see the peso depreciating further in the third quarter and in the next 12 months after breaching the 55 to $1 and hitting the weakest level in almost 17 years.

Businesses, Alegre said, are also expecting that inflation will settle at 4.1 percent in the third quarter and the next 12 months, breaching the BSP’s two to four percent target range.

“Firms also expect that the peso borrowing and inflation rates may rise during the same periods,” Alegre said.