THE COUNTRY?S BUSINESS SECTOR IS more optimistic this quarter and expects profits to further improve in the first quarter of 2010.

According to the quarterly Business Expectation Survey (BES) of the Bangko Sentral ng Pilipinas (BSP), the confidence index of companies for the current quarter has improved to +22 percent due to the perception that the worst of the global economic turmoil is over.

The business confidence index is measured by subtracting the number of poorly performing firms in the current quarter from that of the previous quarter. A positive index, therefore, means that optimistic firms outnumbered the pessimistic ones.

The latest business confidence index is better than the +18 percent recorded in the third quarter, the -2.6 percent in the second, and the -23.9 percent in the first.

For the first quarter of 2010, the index stands at +34 percent, indicating that companies in the country expect a more pronounced recovery of the global economy, resulting in faster growth of the Philippine economy.

?The more buoyant business sentiment reflected expectations of better economic performance in the current and next quarters, with clearer indications of improving conditions in the global economy,? the BSP said in a statement.

The survey cited low interest rates, benign inflation, and stable peso among the macroeconomic factors that helped improve the domestic economy.

Sentiment was much bleaker earlier in the year when more industrialized nations fell into recession. There were earlier concerns that the Philippine economy would contract as well, although these fears dissipated following growth of the domestic economy by 1.5 percent in the second quarter.

In the first quarter, growth stood at a measly 0.6 percent.

Officials said the faster growth of the economy in the third quarter would help restore investors? confidence in the country, officials said. Economic managers said chances of the country slipping into a recession had become remote, noting that the economy was actually headed for a faster growth.

The improved sentiment came with an increase in the capacity utilization of businesses. According to the survey, average capacity utilization rate of respondent firms rose to 69.8 percent this quarter from 68.8 percent in the previous quarter.

Diwa Guinigundo, BSP deputy governor, said the rise in capacity utilization rate indicated an increase in production and demand for goods of respondent firms.

Businesses also said they felt an improvement in credit access in the current quarter. The credit access index stands at +0.1 percent for this quarter, a turnaround from the -0.8 recorded previously.

The positive credit access index means that respondent firms who believe that they can secure loans whenever needed outnumber those who claim otherwise.

Despite improved business sentiment, however, Guinigundo said this did not necessarily mean the central bank would reverse its monetary policy stance.

He said the BSP would still keep the low-interest-rate environment to further bolster growth of the economy.

The BSP had implemented a series of policy rate cut from December 2008 to July 2009, bringing down the overnight borrowing and lending rates to historic lows of 4 and 6 percent, respectively.

The BSP said recovery should be more pronounced before it would implement a hike in interest rates.

The survey was conducted between Oct. 1 and Nov. 6, and covered 1,380 firms nationwide.