Business optimism down in second quarter – poll

Published by rudy Date posted on May 27, 2011

MANILA, Philippines – Businessmen are less buoyant as the business optimism index fell for the second straight quarter under the Aquino administration.

The fall was due to higher operating costs, slow business procedures, and delayed fund disbursements for the Public-Private Partnership (PPP) scheme, a survey by the Bangko Sentral ng Pilipinas (BSP) showed.

After hitting a new record high of 50.6 percent in the fourth quarter of 2010, the BSP’s Business Expectation Survey showed that the business confidence index declined to 31.8 percent in the second quarter from 47.5 percent in the first quarter.

The index increased to 45 percent in the third quarter after President Aquino was sworn into office.

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 their views on a given indicator.

A positive confidence index indicates a favorable view.

Rosabel Guerrero, BSP Department of Economic Statistics director, said the weaker business sentiment in the second quarter of the year could be attributed to surging operating costs, slow business procedures, and delayed disbursements for government projects.

“They (respondents) cited some domestic constraints to the business environment that contributed to their weaker sentiment, namely, higher operational costs as well as slow business procedures and fund disbursements for government construction projects,” she said.

Guerrero said respondents also blamed the less buoyant business outlook on global business developments like rising global oil and commodity prices, ongoing political tensions in the Middle East and North African, and the disasters in Japan last March 11.

“The current quarter’s outlook was less upbeat, however, compared to those of a quarter and a year ago,” she said.

“This indicates that optimists continued to outnumber the pessimists even as the number of respondents holding a positive view declined.”

Guerrero said the business confidence index for the next quarter also declined to 33 percent from the previous quarter’s record level of 59.4 percent due to the perceived economic growth slowdown.

“The second quarter and third quarter 2011 outlook suggests that the Philippine growth trend could be sustained, but a slowdown is possible after the reported growth of 7.6 percent in 2010,” she said.

Guerrero said the business confidence index of the construction sector fell to 41.9 percent from 55.8 percent but remained the most optimistic among all sectors.

“Respondents’ views were weighed down by the slow disbursements of funds for infrastructure projects under the PPP scheme, rationalization of other government programs in an effort to bring down costs and create savings, as well as the increasing costs of building materials,” she said.

The Philippines posted its strongest economic growth in 34 years after its gross domestic product (GDP) expanded by 7.6 percent after slowing down to 1.1 percent in 2009 from 3.8 percent in 2008 due to the global financial crisis.

The weaker business sentiment could be traced to the delayed take-off of the administration’s PPP scheme that would boost economic activities.

Controlled spending helped the national government post a budget surplus of P61 million in the first four months of the year after booking a 25-year high surplus of P26.3 billion in April.

Revenues posted a double-digit growth of 18.22 percent to P461.41 billion in January to April from P390.29 billion in the same period last year, while government expenditures fell 11.6 percent to P461.35 billion from P521.87 billion.

The government hopes to trim the budget deficit to P300 billion or 3.2 percent of GDP this year from a record P314.8 billion or 3.7 percent of GDP last year.

The administration has committed to trim the budget shortfall to 2 percent of GDP starting 2013 until 2016.

The survey showed that the business outlook index of the industry sector eased to 31.9 percent in the second quarter from 48.1 percent in the previous quarter.

On the other hand, the index of the services sector likewise declined to 39.3 percent from 48.9 percent due to lower demand in light of the MENA crisis and the disasters in Japan as well as increasing prices, and stiffer competition.

The index of the firms in the wholesale and retail industry plunged to 23.9 percent from 44.6 percent due to elevated oil and commodity prices as well as lack of raw materials for production, and the decline in orders from their Japanese markets.

The Q2 2011 Business Expectation Survey was conducted from April 1 to May 10 and covered 1,625 firms nationwide.

Respondents also see inflation and interest rates rising and the peso appreciating further against the US dollar.

BSP Deputy Governor Diwa Guinigundo said it is wrong to conclude that businessmen are now getting impatient with the Aquino administration.

“I think it is very difficult to say that the business community is getting impatient. There is no basis for that,” he said. –Lawrence Agcaoili (The Philippine Star)

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