PHL business confidence drops in Q1 2016 – BSP survey

The business sector is less optimistic about the first quarter of the year as economic activity slows down after the holiday season, according to the latest Business Expectations Survey conducted by the Bangko Sentral ng Pilipinas (BSP).

The overall confidence index (CI) declined to 41.9 percent for the first three months of the year from 45.2 percent a year earlier and 51.3 percent in the fourth quarter of 2015.

"Business sentiment remains favorable for the first quarter although optimism was lower from the outlook a year ago," BSP Monetary Policy Subsector Managing Director Francisco G. Dakila Jr. told reporters on Friday.

The less upbeat outlook was seasonal for the first quarter, Dakila noted.

"Movement is really to be expected because this is largely due to seasonality. Of the 15 survey results we have had so far, 10 showed a downturn. That's a two-thirds majority reflecting the seasonality," he said.

The Bangko Sentral also noted the decline in world oil prices and other commodities, as well as growing concerns about the global economic growth amid the weak performance of China.

The drop in optimism was also linked to the wait-and-see attitude of businesses in relation to the May elections, the adverse impact of El Niño, the strong market competition, and the bearish trend in the stock market.

On the other hand, businesses were more optimistic about the second quarter, with the index rising to 49.6 percent from 43.9 percent.

"The next quarter CI suggests that economic growth could be higher for the next quarter," Dakila said.

A more favorable outlook was driven by election-related spending in the run up to the May elections, more orders and projects, and higher demand for summer.

Respondents also expect the introduction of new and enhanced business processes, business expansions, and new product lines.

"(I)n anticipation of brisker business for Q2 2016, the outlook of firms on the volume of business activity for the quarter ahead turned more optimistic across sectors," the central bank said in a separate statement.

The employment outlook also increased to 27.2 percent from 19.5 percent, indicating expectations of an overall increase in the number of new employees for the second quarter.

On inflation, more respondents expected inflation to rise for the current and next quarters.

Still, businesses expected inflation to "remain low" at 1.9 percent in the first quarter and 2.1 percent in the second quarter.

More respondents also expected the peso to appreciate and interest rates to increase in the first quarter of the year.

The survey was conducted from January 5 to February 17, with a total of 1,539 respondent firms. – VDS, GMA News