Firms to expand, hire more in next 12 months – survey

by Lawrence Agcaoili (The Philippine Star), 5 Jul 2021

MANILA, Philippines — More companies are planning to expand their operations and hire more workers as the economy continues to reopen and recover from the pandemic-induced recession, according to the Bangko Sentral ng Pilipinas (BSP).

Redentor Paolo Alegre, senior director of the BSP’s Department of Economic Statistics, said the result of the latest Business Expectations Survey (BES) showed that the percentage of businesses with expansion plans in the industry sector rose further to 21.1 percent for the third quarter from the previous quarter’s 20.6 percent.

“The percentage of firms that expressed expansion plans for the next quarter rose for electricity, gas and water, and agriculture, fishery and forestry sub-sectors,” Alegre said.

For the next 12 months, Alegre said the percentage of businesses with expansion plans, particularly for electricity, gas and water and agriculture, fishery and forestry, as well as mining and quarrying sub-sectors rose to 27.8 percent from 27 percent.

On the other hand, the employment outlook index slipped to five percent from 5.7 percent for the third quarter, but was higher for the next 12 months at 14.7 percent from 11.7 percent.

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

The average capacity utilization in the industry and construction sectors decreased slightly to 69.6 percent in the second quarter from 70.1 percent in the first quarter as the National Capital Region and nearby provinces (NCR Plus) reverted to enhanced community quarantine due to the resurgence of COVID-19 infections.

Alegre said the bulk or 44.1 percent of the respondents of the BES conducted from April 7 to May 27 covering 1,513 companies tagged weak demand resulting in low sales volume as the major risk to businesses, followed by stiff competition.

“Further, a majority of the respondents that specified other factors indicated the continued adverse effects of the COVID-19 pandemic as their additional business constraint,” he said.

Business sentiment has been slumping as the confidence index fell to 1.4 percent from 17.4 percent for the second quarter, 31.4 percent from 42.8 percent for the third quarter, and 52.5 percent from 60.5 percent for the next 12 months.

This was caused by the elevated inflation that exceeded the upper end of the BSP’s two to four percent target, as well as the resurgence of COVID-19 cases, which resulted in the reimposition of stricter community quarantine in the NCR Plus.

As a result, economic managers are now looking at a slower economic expansion of six to seven percent for this year and seven to nine percent for next year.