Latest BSP survey shows firms bullish on 2011

MANILA, Philippines—Businesses in the country are planning to expand operations in 2011 as they remain optimistic about the economy’s ability to follow through on its recovery this year from the global crisis in 2009.

This was according to the results of a quarterly survey conducted by the Bangko Sentral ng Pilipinas, which said the general trend was for companies to invest more and expand operations.

The latest Business Expectation Survey (BES), conducted from the first week of October to the first week of November, showed that the employment index hit +21.1 percent. This was much higher than the +8.7 percent registered in the survey conducted in the same period a year ago.

A positive index means the percentage of respondent firms that plan to expand operations and hire more workers outnumbered those with no such plans.

There were 1,624 firms surveyed and the response rate stood at 75.4 percent.

Rosabel Guerrero, director of the department of economic statistics at the central bank, said the favorable employment index came with the economy’s improved situation, which made businessmen believe demand by consumers for their goods and services would grow. In turn, their profits would rise.

The latest employment index, however, was lower than the +24 percent registered in the third quarter. BSP officials said the lower figure was likely driven by expectations that growth, although seen to remain at respectable level, would slow down in 2011 as the economy returns to normalcy.

In the first half, the economy—as measured by the gross domestic product—posted a robust 7.9-percent growth. Last year, growth was anemic at 1.1 percent due to the ill effects of the global economic turmoil.

Economists from the private sector said that by 2011, the Philippines would solidify its recovery from the deceleration in 2009 as it was likely to grow at least 5 percent. However, they stressed that it was unlikely for the economy to register a growth above 7 percent.

This view was contrary to what the government was targeting. The Aquino administration wants the economy to grow at least 7 percent a year over the medium term. Its economic managers said a growth of at least 7 percent for the medium to long term is needed to reduce poverty.

The favorable employment index recorded in the latest BSP survey was consistent with the improved business sentiment. The BSP reported last week that the business confidence index registered a new all-time high of +50.6 percent.

The latest business confidence index was higher than the +45 percent recorded in the survey conducted in the third quarter of the year and the +22 percent posted in the fourth quarter of last year.

The business confidence index is measured by the difference between the percentage of firms that have a positive outlook on the economy and their profitability, and those with an unfavorable outlook.

Consumption-driven sectors have so far benefited from the surge in economic activity, which was fueled mainly by remittances from overseas Filipinos.

This is manifested in the ongoing stock market bull run, which has seen the main Philippine Stock Exchange index (PSEi) surge to all-time highs.

Third-quarter net profit reports of most listed firms have been very positive, fueling interest in local equities.

Economists and stock analysts expect the local market to mirror the healthy economic performance of the Philippines in 2011. –Michelle Remo, Philippine Daily Inquirer