More firms to expand in third quarter, survey shows

MANILA, Philippines – More firms across all industry sectors have indicated expansion plans for the next quarter in line with the bullish outlook of businessmen on the ability of the domestic economy to recover from the global economic meltdown, a survey conducted by the Bangko Sentral ng Pilipinas (BSP) showed.

The Business Expectations Survey for the second quarter of 2010 showed that 25 percent of the total responding companies expressed interest in expanding their operations in the third quarter of the year compared to 19.9 percent in the previous quarter.

“Consistent with the more positive outlook of the industry sector about their own operations, more firms indicated expansion plans for third quarter of 2010. Expansion plans were noted across all sub-sectors, with the mining and quarrying sub-sector recording the highest year-on-year growth,” the BSP stated.

About 39.7 percent of the responding firms engaged in agriculture, fishery, and forestry sector announced plans to expand their operations in the third quarter while 36.7 percent of the companies involved in mining and quarrying expressed plans to undertake expansion plans.

On the other hand, 24.1 percent of the responding firms engaged in the manufacturing sector revealed plans to expand their operations while 16.7 percent involved in electricity, gas, and water announced plans to undertake expansion projects.

The BSP survey also showed that employment expectations show a high level of optimism in the third quarter as the employment outlook index reached 19.9 percent in the second quarter from 22 percent in the first quarter of the year.

“The employment outlook index at 19.9 percent, although lower from its quarter-ago level, indicated that hiring of additional employees is expected to continue in the third quarter of 2010,” the central bank said.

It added that favorable employment prospects were anticipated in the services sector specifically renting and business activities, and financial intermediation sub-sectors.

Responding firms identified competition, weak demand leading to low sales volume, and financial problems were the key challenges to business activity in second quarter of 2010.

The BSP survey also showed that businessmen expect inflation and interest rates to go up and the peso to appreciate in second and third quarter this year.

“The anticipated appreciation of the peso in second and third quarter of 2010 could stem from sustained foreign exchange inflows arising from the improved performance of exports, steady overseas Filipino remittances, and foreign direct and portfolio investments,” it said.

The survey that was conducted from April 5 to May 7 covering 1,632 firms nationwide showed that business sentiment was more bouyant in the second quarter of 2010 as the overall confidence index rose to 43.9 percent.

This was the fourth straight quarter that the confidence index increased steadily from 18.4 percent in the third quarter of 2009 to 22 percent in the fourth quarter of 2009, and to 39.1 percent in the first quarter of 2010.

Prior to this, the confidence index was in the negative territory at -12.9 percent in the third quarter of 2008. – 6.8 percent in the fourth quarter of 2008, -23.9 percent in the first quarter of 2009, and -2.6 percent in the second quarter of 2009 during the height of the global financial crisis.

Data showed that the confidence index peaked at 49.4 percent in the fourth quarter of 2006. The index was placed at 44.9 percent in the first quarter of 2007, 46.4 percent in the second, 40.9 percent in the third, and 48 percent in the fourth quarter.

Economic managers through the Cabinet-level Development Budget Coordination Committee (DBCC) see the country’s domestic output as measured by the gross domestic product (GDP) expanding between 2.6 percent and 3.6 percent this year after slackening to 0.9 percent last year from 3.8 percent in 2008 due to the global financial crisis. –Lawrence Agcaoili (The Philippine Star)