The outlook and sentiments of Filipino businessmen remained on the optimistic side for the first half of this year and even in the next 12 months despite increased COVID-19 cases and potential slowing of vaccine supply, according to a Bangko Sentral ng Pilipinas (BSP) quarterly survey conducted before March 29.
Based on the first quarter Business Expectations Survey (BES), business optimism is higher in January to March compared to end-December 2020 on the back of expectations of a still strong peso, higher borrowing rates, improvement in employment numbers and rollout of vaccines.
The BES was however conducted February 4 until March 12, weeks before the government reimposed the stricter enhanced community quarantine on March 29 which it announced on the night of March 27.
The BES results showed that sentiment of business owners improved two quarters in a row with an overall confidence index (CI) of 17.4 percent from 10.6 percent in the fourth quarter 2020. For the second quarter 2021, the CI also increased to 42.8 percent versus the previous 37.4 percent.
The business outlook on the country’s economy for the next 12 months also showed marked improvement as the CI rose to 60.5 percent from 57.7 percent in the previous quarter. The CI for the next 12 months is the highest index recorded since the start of the 12-month outlook in 2019, said the BSP.
Redentor Paolo M. Alegre, head of the BSP Department of Economic Statistics, said Thursday that business confidence is more upbeat for the first half of 2021 and the next 12 months due to easing of quarantine restrictions and reopening of businesses. The “observation that people are adapting to the ‘new normal’” is also one of the factors for the optimism.
Alegre also cited the increase in volume of sales and orders, the rollout of vaccine for COVID-19, and the development of new business/marketing strategies as reasons for the continued improvement in CIs in the last two surveys.
The BES also noted the expectations of higher demand for electricity and construction activities during summer for their more buoyant views for the second quarter this year.
Based on the survey, trading firms such as exporters and importers also continue to express optimism for the near term with importer, dual-activity and domestic-oriented firms more confident on the business environment than exporters.
Business sentiments of the wholesale and retail trade sectors were also more upbeat however the construction sector was less optimistic.
As for businessmen’s outlook on business operations, this is more buoyant for the first quarter and the next as well as 12 months ahead. The survey noted that the outlook on the volume of business activity was more upbeat across sectors, except for the construction sector.
On the employment side, this also remains optimistic. The BSP said this suggests that firms are expected to hire more people in the second quarter this year and in the next 12 months. As such, capacity utilization will rise and expansion plans should go forward by the second quarter, said the BSP.
In the meantime, Alegre said financial conditions and access to credit are expected to remain right.
Generally, he said business owners do see a stronger peso and lower peso borrowing rate but higher inflation.
“The survey results showed that businesses expect the peso to appreciate against the US dollar, peso borrowing rates to decline, but inflation to increase for the first quarter,” said Alegre. “Firms anticipated the peso to depreciate for the next quarter and the next 12 months.”
The BSP has communicated its inflation forecasts and inflation expectations which are projected to increase in the first half of 2021 before tapering off in the last quarter until first three months of 2022. For the entire year, the BSP’s forecast is 4.2 percent average inflation, more than the two-four percent target.
Peso borrowing rates are “likely to increase for the next quarter and the next 12 months,” according to the BES.
The latest BES surveyed 1,512 firms nationwide covering 16 regions, of which 585 companies are located in the National Capital Region (NCR) and 927 firms are outside of the NCR.