Filipino Businesses Maintain Optimistic Outlook

Local businessmen are still optimistic about growth, demand and sales prospects for the third quarter and in the next 12 months due to easing inflation and improved economic activity, according to a central bank survey.

Photo Insert: Besides easing inflation, businesses also anticipate continued post-pandemic recovery, a fully reopened economy, and a seasonal uptick in demand for certain goods and services during the hot dry season.

Based on the Bangko Sentral ng Pilipinas’ (BSP) second quarter Business Expectations Survey (BES), businesses’ overall confidence index (CI) rose to 40.8% from 34% in the first quarter.

BSP Senior Director Redentor Paolo M. Alegre Jr. of the Department of Economic Statistics said Friday, June 23, that the number of optimists increased during the quarter because of their expectations that sales and production will improve in the next months due to stronger demand for goods and services across all sectors.

Besides easing inflation, businesses also anticipate continued post-pandemic recovery, a fully reopened economy, and a seasonal uptick in demand for certain goods and services during the hot dry season.

Alegre told reporters that for the third quarter and the next 12 months, the sentiment while positive was “less buoyant” with a CI that declined to 46.4% from 49% in the previous survey.

The surveyed firms’ less optimistic outlook for the next quarter was due to: a seasonal downturn in production and sales during the rainy season; elevated inflation; lower demand for consumer and intermediate goods such as food supplements and plastic products; fewer construction projects; and high interest rates.

Based on the BES report for the next 12 months, business sentiment was less upbeat with a CI that dropped to 58.5% from the previous quarter’s 61.9%.

High inflation, an expected decrease in sales due to weaker demand, and the perceived slow rollout of government infrastructure projects were some of the reasons cited. Other concerns are high interest rate and the adverse effects of El Niño.

Meanwhile, surveyed firms expect continued tight financial conditions and access to credit for the second quarter due to higher lending rates after the BSP raised the benchmark rate by a cumulative 425 basis points in a year-long tightening monetary policy stance.

Alegre said businesses also expect a weak peso vis-à-vis the US dollar and higher borrowing and inflation rates for the second quarter. He said firms expect the peso to be relatively steady at P55 in the next quarter and in 12 months. However, they also expect that the peso may appreciate in the third quarter.

As has been communicated by the BSP, businesses believe the inflation rate will stay elevated or above the target of two percent to four percent for most of 2023.

They expect that the inflation rate may average 7.2% in the second quarter, 7.1% in the third quarter, and 6.9% in the next 12 months.

Generally, the BES noted that sentiment across all sectors is mainly more optimistic for the second quarter with higher CIs for the industry, services, and wholesale and retail trade sectors while the construction sector CI declined.

The second quarter BES was conducted from April 5 until May 24. It covered 1,549 firms nationwide, of which 580 are in the National Capital Region (NCR) and 969 firms are in areas outside of the NCR.

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