By Bernie Cahiles-Magkilat
Global uncertainty may be rising but Philippine companies have maintained their optimistic outlook on the domestic economy, according to a recent business survey.
The latest International Business Report (IBR) by Grant Thornton International revealed that emerging markets in the Asia Pacific region, including the Philippines are holding up well.
Data on the first half of 2019 show that optimism, revenue expectations, and profitability forecasts are down in economies around the globe compared with second-half 2018 data, “with most of the main measures of growth at levels not seen since 2016,” the IBR said.
The report, however, noted pockets of resilience seen across mid-sized companies, such as in export expectations, which fare well globally amid the United States-China trade war.
But overall, the outlook continues to vary between emerging and developed economies in Asia Pacific, reflecting varying levels of their exposure to the trade war. Optimism is generally down in the region, falling 8 percentage points since the second half of 2019 and more than 50 percent lower than the first half of 2018.
Less developed economies such as the Philippines, however, have rosier prospects. Philippine businesses are more upbeat than anywhere else in the region, with 73 percent optimistic about the domestic economy.
Expectations for revenue and profit growth in the ASEAN mid-market, too, have risen and are now among the highest seen globally.
“It’s important to heed the signs of volatility and uncertainty in global financial markets, but it’s also worth highlighting that local business leaders choose not to be paralyzed or get sidetracked by the grim possibilities. It’s likely because with strong economic fundamentals still in place, their business is poised to grow and more opportunities will surface,” said Maria Victoria C. Espano, chairperson and chief executive officer of top auditing firm P&A Grant Thornton.
Espano also cited bigger capital spending, especially by the government, and the steady flow of remittances from overseas Filipino workers (OFWs) that continue to boost overall economic growth and optimism.
In September, a slowdown in the global economy and domestic investment prompted the Asian Development Bank (ADB) to provide a slightly lower economic growth forecast for the Philippines. In an update of its flagship annual economic publication, ADB changed its forecast for the country’s gross domestic product (GDP) growth to 6 percent in 2019 and 6.2 percent in 2020, against earlier forecast of 6.4 percent for both years. The International Monetary Fund (IMF) has a slightly lower projection of 5.7 percent GDP in 2019, 6.2 percent in 2020, and 6.5 percent by 2024. The World Bank’s updated projection for 2019 is at 5.8 percent GDP.
Investor sentiment in the country is generally positive paired with a pickup in business confidence, as reflected in the Bangko Sentral ng Pilipinas’ (BSP) third-quarter Consumer Expectations Survey.
Globally, optimism continues to fall and uncertainty lingers in the mid-market.
The outlook for the next 12 months has fallen to a three-year low, with a net optimism of 32%, down from a net 39% in the second half of 2018. Economic uncertainty remains elevated, with 46% of firms identifying this as a constraint to business growth.