Business sentiment continues to improve

MANILA, Philippines – The business sector’s outlook improved for the third straight quarter this year as companies expect low inflation and interest rates, stable peso, sustained foreign exchange inflows, and robust remittances from overseas Filipino workers (OFWs).

Cyd Tuano-Amador, assistant governor of the Bangko Sentral ng Pilipinas (BSP), said the business confidence index (CI) rose to 22 percent for the fourth quarter from 18.4 percent in the third quarter.

Amador told reporters that the current CI was also a complete reversal of the -6.8 percent registered in the fourth quarter of 2008.

“This is the third consecutive quarter since the first quarter 2009 that business sentiment has shown an improvement after broadly cautious outlook that prevailed in 2008,” she said.

Likewise, the business CI for the first quarter of 2010 also improved to 34 percent compared with 33.7 percent in the third quarter and -0.5 percent in the fourth quarter of last year.

According to Amador, the more buoyant business sentiment reflected expectations of better economic performance in the current and next quarters due to clearer indications of improving conditions of the global economy.

She also cited the improving business confidence in countries such as the US, Japan, Europe, Australia, India, Singapore, Malaysia, and Hong Kong.

Amador said respondents of the quarterly survey that was conducted between Oct. 1 and Nov. 6 covering 1,380 companies do not anticipate tropical storm Ondoy and typhoon Pepeng to have a long-lasting and significant impact on the overall positive direction of economic activity.

BSP officials also attributed the more favorable outlook of the respondents to the supportive macroeconomic conditions such as low inflation and interest rates, relatively stable peso, and sustained foreign exchange inflows from foreign investments of overseas Filipino workers’ remittances.

They also cited the expected increase in consumer spending due to the Christmas season and the 2010 national and local elections as well as the introduction of new and enhanced business strategies.

BSP’s Department of Economic Statistics director Rosabele Guerrero said more firms anticipated inflation to accelerate in the fourth quarter of the year due to increases in the prices of basic commodities caused by damages to crops and infrastructure during the recent calamities and anticipated increases in oil prices.

Despite the higher inflation, Guerrero said firms anticipate interest rates to remain stable and the peso to appreciate against the dollar in the fourth quarter of the year.

She added that respondents particularly those in the industry sector are generally enthusiastic that their own business operations would improve in the last quarter of the year as their capacity utilization improved to 69.8 percent from 68.8 percent.

The BES also indicated that the credit access index for the fourth quarter of the year continued to improve with more firms experiencing some modest improvement in their access to credit.

“Financial conditions remained tight but showed signs of easing as fewer respondents expected liquidity problems in the fourth quarter compared to the previous quarter a year ago,” the BES stated.

Guerrero said more industrial firms also indicated expansion plans for the first quarter of 2010 consistent with the improvement in the outlook on business operations of the industry sector. –Lawrence Agcaoili (The Philippine Star)