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Business confidence in Q3 drops to lowest level since 2009

Business confidence in the Philippines grew less optimistic during the third quarter of 2018, the Bangko Sentral ng Pilipinas (BSP) reported Thursday.

This outlook of the Philippine business sector on the economy is the least optimistic in more than eight years, according to results of the BSP’s  Business Expectations Survey (BES).

The overall confidence index (CI) of the business sector fell to 30.1 percent in July to September, the lowest since it registered at 22.0 in the fourth quarter of 2009, said Redentor Paolo Alegre Jr., head of the BSP Department of Economic Statistics.

The CI is part of the central bank’s BES conducted from July 2 to August 29 this year.

The decline in optimism of the business sector was warranted, said Cid Terosa, dean of the University of Asia and Pacific’s (UA&P) School of Economics.

“The continuing increase in prices and the failure of government to arrest it cast a dark shadow on the economic horizon,” he told GMA News Online.

“The weakening of the peso, rise in prices of petroleum products, and supply shortages continue to beleaguer the economy,” Terosa noted.

Respondents attributed their weaker sentiment in the third quarter to five reasons, Alegre said in a press conference at the BSP headquarters in Manila.

Their sentiment was influenced by the following factors

  • increasing prices of basic commodities
  • rising overhead costs
  • business interruption during the rainy season
  • weakening peso
  • stiffer competition

“Reasons given by the respondents, aside from citing ... higher commodity prices together with implementation of higher excise taxes, they also cited seasonal factors,” BSP Deputy Governor Diwa Guinigundo said in the same press conference.

John Paolo Rivera, an independent economic consultant, noted that inflation may be the main reason.

“Decline in optimism can be due to high inflation (higher cost of raw materials, rising fuel cost, impending wage spiral) and the delay in policy effects,” he said in a separate text message.

There is a lag before policies to counter inflation take effect, Rivera noted.

However, results of the BES for the fourth quarter, showed that the business outlook turned more upbeat as the CI rose to 42.6 percent from 40.4 percent.

“For the quarter ahead, the respondents were more positive, more optimistic,” Guinigundo said, noting that respondents cited six reasons for the positive outlook.

The six factors that elicited a more positive outlook for October to December are the following:

  • expected uptick in consumer demand
  • continued increase in orders and projects
  • expansion of businesses
  • continued rollout of government infrastructure projects
  • favorable weather conditions
  • reopening of the fishing season in October

The index is computed as the percentage of companies that answered that they are optimistic about the economy, minus the percentage of firms that answered in the negative. —VDS, GMA News