Businesses less optimistic about Q3 prospects

Market volatility dampens local trade sentiment, says BSP

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10:47 PM August 30th, 2013

By: Paolo G. Montecillo, August 30th, 2013 10:47 PM

Local businesses were slightly less optimistic about prospects in the third quarter amid fears that volatility in financial markets could dampen the real economy.

Results of the Bangko Sentral ng Pilipinas’ (BSP) quarterly Business Expectations Survey (BES) showed that companies with rosy outlooks still outnumbered the pessimists, although the gap between the two was slightly narrower than the previous three-month period.

“The sentiment of businesses in the Philippines mirrored the weaker outlook in Hong Kong, South Korea, and India, but was in contrast to the more favorable sentiment of businesses in the United States, the United Kingdom, Canada, Germany, and New Zealand,” the BSP said in reporting the survey results.

The overall confidence index for the third quarter—which marks the height of the country’s rainy season—slumped to 42.8 percent, lower than the record high of 54.9 percent in the second quarter.

The confidence index is the difference between companies that said they were optimistic and those that believed otherwise.

Companies covered by the survey cited lower seasonal demand, possible operational interruptions due to bad weather, stiffer competition from China, and volatile movement of the peso as the main reasons for the deterioration in their confidence, the BSP said.

However, the same survey showed that businesses saw conditions improving in the fourth quarter of the year when demand is usually strongest.

The confidence index for the October to December period of the year reached 60 percent—a record high.

“This suggests that the growth momentum could accelerate in the last quarter of 2013,” the BSP report said.

Historically, the BES has a close correlation with the country’s GDP, BSP Deputy Governor Diwa C. Guinigundo said during a press conference.

“You could say [the BES is] a leading indicator,” Guinigundo added.

The BSP said the rosier outlook for the last quarter of the year was brought on by the usual pickup of business during the holiday season, continued increase in orders and projects leading to higher volume of production, and the introduction of new product lines.

Guinigundo said that the better forecast for the fourth quarter could be an indication that businessmen expect the volatility in financial markets to subside soon.

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