Positive business outlook on the Philippine economy improved for the fourth quarter of 2019, as the overall confidence index (CI) based on the Q4 2019 Business Expectation Survey conducted by the Bangko Sentral ng Pilipinas increased to 40.2 percent from 37.3 percent in Q3 2019.
This was reflective of the higher increase in the percentage of optimists, which outweighed the increase in the percentage of pessimists from the previous quarter’s survey results.
Respondents attributed their more optimistic sentiment for the quarter to: higher consumer demand during the holiday and harvest seasons, increase in sales, orders, and projects, more favorable macroeconomic conditions, higher government spending, mainly in infrastructure, and business expansion.
Firms also cited the anticipated positive impact of the country’s hosting of the 2019 Southeast Asian (SEA) Games.
The sentiment of businesses in the Philippines mirrored the more buoyant business outlook in Brazil, Chile, Hungary, and the Netherlands.
Meanwhile, business sentiments in Bulgaria, Croatia, Greece, Israel, Norway, and Ukraine were less optimistic. Canada, China, Denmark, Euro Area, Hong Kong, New Zealand, Singapore, South Korea, Thailand, United Kingdom, and the United States remained pessimistic.
For the first quarter of next year, positive business outlook weakened as the next quarter CI declined to 40.3 percent from the Q3 2019 survey result of 56.1 percent in Q4 2019.
Respondents’ less favorable outlook for Q1 2020 was due mainly to expectations of: lower consumer demand after the holiday and harvest seasons, decline in sales and orders, stiffer competition, and other factors like rising prices, concerns over the African Swine Flu (ASF) epidemic, and fishing ban period.
Business outlook on the country’s economy was more positive for the next 12 months, as the CI inched up to 59.6 percent from 58.6 percent in the previous quarter.
The more optimistic outlook of the respondents for the next 12 months was attributed to expectations of: sound macrofundamentals, increase in consumer demand, higher government spending on infrastructure, development of new product lines/models and marketing and business strategies, business expansion, and incoming new projects, clients and prospective customers.
Across different types of trading firms, business sentiment was mixed for Q4 2019.
Views of importers and domestic-oriented firms were more buoyant as they anticipated increase in sales and higher demand on pharmaceutical products, and food and beverages during the holiday and harvest seasons.
Meanwhile, exporters and dual-activity firms were less optimistic for Q4 2019 as they expected lower demand in electronics and delay in shipment due to port congestion.
For Q1 2020, the outlook of importers, exporters and domestic-oriented firms was less buoyant on expectations of seasonal slack in demand after the holiday season. However, dual-activity firms’ outlook was more positive due to the anticipation of business expansion and potential customers.
For the next 12 months, outlook of dual-activity firms was more optimistic as they expected increase in demand for manufactured products, particularly activated carbon, jewelry, rubber beltings, and automotive parts, more favorable macroeconomic conditions, and new clients and projects.
However, importers, exporters, and domestic-oriented firms cited stiffer competition and concerns on the impact of potential tax reform and global concerns as reasons for their less upbeat outlook.
The outlook of firms about their own business operations improved for Q4 2019 compared to their sentiment in Q3 2019.
The sentiment of firms on the volume of business activity and volume of total orders booked was more upbeat across sectors, except for the industry sector, which was less buoyant. For Q1 2020, the outlook on volume of business activity was less upbeat across sectors, except for the construction sector, which was more upbeat.
The respondent firms’ outlook on volume of business activity for the next 12 months was broadly steady. The sentiment of the industry and construction firms on the volume of business activity was steady while firms from the trade and services sectors were more optimistic.
The employment outlook index for Q1 2020 and the next 12 months remained positive although lower at 16.6 percent and 34.5 percent, respectively, compared to the Q3 2019 survey results for Q4 2019 and the next 12 months at 19.6 percent and 35.8 percent, respectively.
This suggests that more firms will continue to hire new employees, although the number that said so are lower compared to the Q3 2019 survey results. The decline in the employment outlook index for both periods stemmed from the moderation of employment prospects in the industry and wholesale and retail trade sectors.
The percentage of businesses with expansion plans in the industry sector for Q1 2020 was lower at 29.2 percent from the Q3 2019 survey results at 30.4 percent but higher for the next 12 months at 38.1 percent from the Q3 2019 survey results at 37.9 percent. The average capacity utilization for Q4 2019 was lower at 75.1 percent from 76.1 percent in Q3 2019.
The Q4 2019 BES was conducted during the period 3 October – 25 November 2019.
There were 1,477 firms surveyed nationwide. Respondents were drawn from the combined list of the Securities and Exchange Commission’s (SEC) Top 7,000 Corporations in 2010 and Business World’s Top 1,000 Corporations in 2017, consisting of 580 companies in NCR and 897 firms in AONCR, covering all 16 regions nationwide.
The survey response rate for this quarter was slightly lower at 81.6 percent from 81.7 percent in the previous quarter.