BSP: Favorable sentiment may bolster economy’s performance

Businesses expect to make more money and hire more people in the current quarter of the year as the government speeds up the rollout of infrastructure projects, bolstering private sector confidence along the way.

The central bank’s quarterly Business Expectations Survey (BES) showed that the confidence of most Philippine companies improved the most this quarter since 2010.

Apart from the usual uptick seen due to increased consumer demand during the holidays, companies that participated in the survey cited improvements in the administration’s infrastructure program.

Bangko Sentral ng Pilipinas (BSP) officials said the improvement in confidence index could bolster the economy’s performance.

“Favorable sentiment is a positive force multiplier,” BSP Assistant Governor Cyd Tuaño-Amador said during a press conference. “This augurs well for future growth given the good correlation between the BES and gross domestic product (GDP).”

For 2014, the government expects GDP growth to average between 6.5 and 7.5 percent, from 7.2 percent last year. In the first half, growth only stood at 6 percent.

The overall confidence index for businesses rose to 48.3 percent from the 34.4 percent posted in the third quarter.

This quarter-on-quarter uptick in the index–the highest since the first quarter of 2010–indicates that more businesses are optimistic about the country’s prospects, the BSP said.

The confidence index is computed as the percentage of firms that answered in the affirmative less the percentage of companies that answered in the negative with respect to their views on a given indicator.

Driving the improvement in sentiment were the acceleration in the rollout of infrastructure and other development projects under the public-private partnership (PPP) program and the favorable macroeconomic conditions in the country.

Respondents particularly cited stable inflation and low interest rates, sustained foreign investment inflows and the steady stream of remittances from workers overseas, the BSP said.

The sentiment of businesses in the Philippines mirrored the more favorable outlook in Canada, New Zealand and Hong Kong SAR, but was in contrast to the weaker outlook of businesses in the United States, the United Kingdom, Germany, China, Singapore and India.