Business optimism hits all-time high

MANILA, Philippines – Businessmen expect a more buoyant economy this year as business optimism hit a new all-time high for the next quarter after a slight dip in the current quarter due to the usual slowdown in business activity after the Christmas and harvest seasons, results of a survey conducted by the Bangko Sentral ng Pilipinas (BSP) showed.

BSP Assistant Governor Maria Cyd Tuano-Amador said in a press conference that business optimism continued to be strong in the first quarter but turned more buoyant for the second quarter.

“Business outlook continues to be upbeat in the first quarter and turns more bullish in the second quarter,” Amador stressed.

BSP director of the Department of Economic Statistics Rosabel Guerrero said the Business Expectations Survey for the first quarter of 2011 showed the confidence index reaching an all-time high of 59.4 percent in the next quarter due to the government’s plans to undertake big-ticket infrastructure projects under the Aquino administration’s public-private partnership (PPP) program and at the same time front-loan infrastructure and social spending.

“Respondents’ outlook for the second quarter turned more buoyant as the next quarter index rose to an all-time high of 59.4 percent, the highest reading since the business expectation survey started in the second quarter of 2001,” Guerrero added.

She also attributed the upbeat outlook of the survey respondents to the faster recovery in emerging and developing economies, steady stream of remittances from overseas Filipinos and foreign capital as well as the continued recovery of merchandise exports and strong confidence in the Aquino government.

“Sustained business optimism indicates that the growth momentum could continue in 2011,” she stressed.

The country’s domestic output as measured by the gross domestic product (GDP) zoomed to its fastest growth in 34 years after expanding by 7.3 percent last year. The Philippines barely escaped recession after the GDP growth slackened to 1.1 percent in 2009 from 3.8 percent in 2008 due to the full impact of the global financial crisis.

The Cabinet-level Development Budget Coordination Committee (DBCC) sees the country’s GDP growing between seven percent and eight percent this year.

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

According to her, the outlook across all sectors turned more upbeat largely due to the anticipated implementation of government projects particularly the PPP programs and prospects of more favorable business conditions such as steady stream of OFW remittances, foreign capital, and export earnings.

“Business confidence remained highest in the construction sector,” Guerrero added.

The survey showed that business outlook index on the macroeconomy for the next quarter of the construction sector hit a new all-time high of 65.2 percent followed by the services sector with 60.8 percent, the wholesale and retail trade with 58.4 percent, and the industrial sector with 57.9 percent.

However, the BSP official said the overall confidence index for the current quarter declined slightly to 47.5 percent from the previous quarter’s 50.6 percent as the the number of optimists relative to pessimists declined.

She attributed the less upbeat outlook for the current quarter to the usual slowdown in business activity after the Christmas and harvest seasons, the rising prices of oil and commodities as well as the abnormal weather conditions in some parts of the country.

For the current quarter, respondents said the business outlook index on the macroeconomy for the construction sector improved to 55.8 percent from 41 percent in the fourth quarter while that of the industry sector went up to 48.1 percent from 44.9 percent. The index for the services sector plunged to 48.9 percent from 63.4 percent while that of wholesale and retail trade slipped to 44.6 percent from 45.3 percent.

“The construction and industry sectors registered a more buoyant outlook, while that of the wholesale and retail trade was broadly stable. On the other hand, optimism in the services sector declined compared to that in the previous year,” she said.

Guerrero explained that reasons cited by the respondents for their sustained sanguine outlook to the revitalized demand for exports and rising commodity prices in the world market, strong domestic demand, improvement in operations, a stable peso, and the general perception of a better business environment.

The the first quarter Business Expectation survey was conducted from January 6 to February 14 and covered 1,630 firms nationwide.

Respondents of the survey also see inflation and interest rates rising in the first and second quarter of the year.

“These expectations were due in part to price pressures arising from the increasing costs of fuel and other commodities in the global market and the strong performance of the domestic economy,” Guerrero said. –Lawrence Agcaoili (The Philippine Star)