Confidence at record high
Rosy business outlook due to improved credit standing
Business confidence in the Philippines hit an all-time high in the second quarter, as the assignment of an investment grade to the Philippines prompted expectations that economic growth would remain robust and would continue to boost corporate earnings.
The Bangko Sentral ng Pilipinas on Thursday reported that the business confidence index for the second quarter hit +54.9 percent, the highest since the BSP started conducting the Business Expectation Survey (BES) in the fourth quarter of 2006.
The latest index was an improvement from the +41.5 percent recorded in the first quarter of this year and the +44.5 percent posted in the second quarter of last year.
The index is computed as the percentage of respondent firms that said they are optimistic about the economy and their financial standing minus the percentage of those that say otherwise.
Results of the survey also showed that the “next quarter confidence index” remained strong at +4.2 percent. This index indicates the companies’ outlook on the economy and their respective financial performance in the coming quarter.
BSP Director Rosabel Guerrero on Thursday said in a briefing that the improvement in the confidence index of most businesses was due to the increase in demand resulting from election-related spending, rising orders experienced by manufacturing firms, and robust construction activities that continue to boost the real estate sector.
Also, the favorable sentiment of businesses was brought on the investment grade rating the Philippines received from international credit agencies, Guerrero added.
On March 27, Fitch Ratings upgraded the Philippines’ credit by a notch from BB+ to BBB-, the minimum investment grade.
On May 2, Standard & Poor’s made the same move, giving the country its second investment grade.
The ratings firms cited the country’s improving macroeconomic fundamentals, including declining debt burden of the government, moderate inflation, buildup of foreign exchange reserves and robust economic growth.
BSP Deputy Governor Diwa Guinigundo said the favorable result of the latest survey on business sentiment indicated that the Philippine economy is poised to sustain a robust pace of expansion.
“There is a good correlation between the confidence index as well as actual performance of the economy,” Guinigundo said in the same briefing.
The government expects the economy to grow between 6 and 7 percent this year. It is scheduled to announce the growth of the economy in the first quarter on May 30.
The latest survey was conducted by the BSP from April 1 to May 10 and covered 1,554 firms. The response rate stood at 83 percent.
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