Businesses turn pessimistic in Q3

by Lawrence Agcaoili – The Philippine Star, 25 Sep 2021

MANILA, Philippines — Businesses turned pessimistic in the third quarter after three consecutive quarters of optimistic sentiment while the outlook of Filipino consumers remained bleak in the third quarter amid the resurgence of COVID infections.

In a virtual press conference, BSP senior director Redentor Paolo Alegre said the overall confidence index of businesses decline to -5.6 percent in the third quarter from 1.4 percent in the second quarter.

The last time the confidence index of businesses was in negative territory was in the third quarter of 2020 at -5.3 percent before improving to 10.6 percent in the fourth quarter of last year, 17.4 percent in the first quarter, and 1.4 percent in the second quarter.

“The negative index resulted from the combined effects of decrease in the percentage of optimists and the increase in the percentage of pessimists,” Alegre said.

He pointed out the third quarter 2021 Business Expectation Survey, which was conducted from July 22 to Sept. 15, also covered the period when the National Capital Region and nearby provinces (NCR Plus) were placed under enhanced community quarantine due to rising COVID cases.

“The respondents’ pessimism was attributed to the ongoing COVID-19 pandemic and its protracted adverse effects to their businesses and reimposition of enhanced community quarantine particularly in NCR,” Alegre said.

He also said the respondents cited concerns over government policies, particularly actions to curb the spread of COVID.

According to the BSP, the respondents also noted the decrease in sales, orders, and income as well as the higher prices of raw materials such as steel, wood liner, glue and other commodities.

However, Alegra pointed out businesses are more optimistic in the fourth quarter with the confidence index improving to 31.9 percent from 31.4 percent due to the availability of more vaccines and the prospect of achieving herd immunity resulting in the further easing of community quarantine and restrictions.

Alegre added respondents also cited the improvement in economic conditions and recovery from losses incurred during the stricter lockdown as well as the increase in volume of sales and orders in time for the Christmas season.

For the next 12 months, he said business sentiment remained more optimistic with a higher confidence index of 56 percent from 52.5 percent on expectation of continued recovery from the pandemic-induced recession.

“The confidence index across all sectors for the next 12 months was more positive. Business confidence improved across all sectors in anticipation of herd immunity, which will result in the reopening of the economy, easing of restrictions, increase in demand, and return to normalcy of processing transactions,” he said.

On the other hand, Alegre said the overall confidence index of consumers remained negative for the fifth straight quarter at -19.3 percent in the third quarter, albeit a big improvement from the -30.9 percent in the second quarter.

“Notably, the consumer outlook has been improving steadily since the third quarter of 2020, the quarter when the index reverted to negative mainly due to the COVID-19 pandemic. The higher third quarter confidence index, although remaining negative, showed that the number of households with optimistic views increased relative to the number in the previous quarter, but was still less than those with pessimistic views during the second quarter of 2021,” Alegre said.

However, the third quarter 2021 Consumer Expectation Survey covering 5,670 respondents was conducted from July 1 to 14 or prior to the reimposition of the enhanced community quarantine in NCR starting Aug. 6.

The improved outlook of consumers was traced to the availability of more jobs and more working family members, additional or higher income as well as effective government policies and programs, particularly in addressing COVID-related concerns, such as the availability and rollout of vaccines, provision of financial assistance, and easing of quarantine restrictions.

Alegre said consumer sentiment improved for the fourth quarter with the confidence index of 2.7 percent from 1.3 percent but declined in next 12 months at 18.6 percent from 19.8 percent.