Philippine businesses are the most optimistic among their counterparts in the world, bucking global uncertainty amid the United States-China trade war.
Results of the recent Grant Thornton’s International Business Report (IBR) showed 73 percent of those surveyed locally are optimistic about the domestic economy.
This is way above the 32 percent of those surveyed globally.
Maria Victoria Espano, chairperson and chief executive officer of P&A Grant Thornton, attributed the optimism to bigger capital spending, especially by the government, and the steady flow of remittances from overseas Filipino workers (OFWs).
These same factors have been fueling the country’s economic growth, Espano said.
The level of optimism is reflected in their expectation of profitability with an overwhelming 80 percent expecting profit growth; 17 percent, flat and only 3 percent seeing a decline.
About 70 percent expect revenues to grow with only 4 percent seeing a drop in sales.
Also, 7 in 10 are willing to hire more workers with only 8 percent saying they will cut their workforce.
The respondents’ past performance was also an indicator of optimism. Forty-nine percent of those surveyed experienced a growth in revenues of more than 5 percent the past 12 months while 37 percent grew the number of workers by more than 5 percent also in the same period.
In the Asia Pacific region, emerging markets including the Philippines are holding up well, the IBR said.
The report is based on a quarterly global survey of nearly 5,000 mid-market companies in over 30 countries interviewed in May and June this year.
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 states. Yet there are pockets of resilience seen across mid-sized companies, such as in export expectations, which fare well globally amid the United States-China trade war.
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.
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,” Espano said.
Global 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 percent, down from a net 39 percent in the second half of 2018. Economic uncertainty remains elevated, with 46 percent of firms identifying this as a constraint to business growth.
Expectations around revenues, profitability, and employment have fallen to 2016 levels globally. Compared with previous periods, fewer firms expect to increase prices over the next 12 months. These findings stay consistent with wider risks of weak inflation, especially as global growth is slowing.
A quarter of firms surveyed identified trade tariffs as one of the most significant external barriers to international expansion, although export optimism has held up well despite a slowdown in trade growth.
Investment intentions are down, with firms generally scaling back investment in new buildings, plant, and machinery likely in response to rising concerns over a shortage in orders as well as the increased uncertainty. Investment in research and development as well as technology, though, continues to shine. With demand softening, firms appear to channel investments into quality enhancements.