Business optimism up - poll

MANILA, Philippines - Business optimism has improved for the third straight quarter on the back of the country’s sound macroeconomic fundamentals amid the debt crisis in Europe as well as growth concerns in the US, results of a survey conducted by the Bangko Sentral ng Pilipinas (BSP) showed.

The central bank’s Business Expectation Survey (BES) for the first quarter of 2012 showed that the business confidence index improved to 40.5 percent in the first quarter of the year from 38.7 percent in the fourth quarter of last year.

The confidence index steadily dropped for two consecutive quarters to 31.8 percent in the second quarter of 2011 from 47.5 percent in the first quarter and from the record 50.6 percent in the fourth quarter of 2010 before improving to 34.1 percent in the third quarter and to 38.7 percent in the fourth quarter of last year.

The confidence index is the percentage of firms that answered in the affirmative less the percentage of firms that answered in the negative with respect to their views on a given indicator. A positive confidence index indicates a favorable view.

BSP Deputy Governor Diwa Guinigundo said in a press conference that the steady improvement in the confidence level of businesses in the country points to stronger economic growth in the first and second quarters of the year.

“The continuing uptrend in business confidence indicates that economic growth is likely to be sustained in 2012,” Guinigundo stressed.

He also cited the increase in orders, new contracts and projects, business expansion arising from steady investment inflows, and introduction of new and enhanced business strategies and product lines.

“The message is quite clear. The idea that we get is that this will be a good leading indicator that would suggest that economic growth in the first and second quarters would be higher than last year’s,” Guinigundo explained.

He said there is a very close correlation between the results of the BES and the country’s economic growth.

The Cabinet-level Development Budget Coordination Committee (DBCC) sees the country’s gross domestic product (GDP) growth expanding between five percent and six percent this year due to higher government spending under the public-private partnership (PPP) scheme of the administration.

The country’s GDP growth slackened to 3.7 percent last year from 7.6 percent in 2010 due to weak global trade, resulting in a sharp drop in the country’s export earnings. Underspending by the Aquino administration had also slowed down growth.

For her part, BSP’s Department of Economic Statistics director Rosabel Guerrero pointed out that business optimism in the Philippines mirrored the improved business outlook of companies in the US, Germany, and India.

Guerrero said the result of the survey was in sharp contrast to the less upbeat sentiment of companies in South Korea, Singapore, and Hong Kong.

The survey also showed a mixed business outlook in the first quarter across all sectors, with the wholesale and retail trade and services sector showing more optimism compared to the construction and industry sectors which were less upbeat.

She said survey respondents expect gradual recovery of the global markets, particularly in the US, as well as the easing of the impact of the tsunami devastation in Japan.

The survey also showed that less respondents expect inflation to go up due to easing global pressures on commodity prices on the back of weaker global growth prospects.

Respondents also saw the peso appreciating vis-a-vis the US dollar due to strong remittances from overseas Filipinos and robust foreign investments.

The survey, conducted between Jan. 6 and Feb. 14, had 1,587 respondent firms from the Top 7,000 Corporations on the list of the Securities and Exchange Commission.