PH business optimism slides

Business leaders across Asia Pacific are divided over the region’s economic prospects as 2017 dawns, indicating that emerging and developed nations are taking diverging tracks, according to the latest quarterly survey of audit and consulting firm Grant Thornton.

Research from the firm’s International Business Report shows that business optimism among developed Asia-Pacific economies fell 8 percentage points in the fourth quarter of 2016 to net -16 percent.

Japan fell 8 percentage points to -45 percent. Among emerging economies in the region, the picture is much brighter. Business optimism rose 11 percentage points to 53 percent.

“Yet, the Philippines has been seeing a decline in optimism in 2016,” it said in a statement. “Starting with only 56 percent in the first quarter, the country saw an unprecedented rise in the second quarter to 94 percent. However, the Philippines experienced a sudden drop of 10 percentage points in the third quarter, which has continued to descend to 80 percent in the fourth quarter.”

Globally, business optimism at the end of the fourth quarter of 2016 stands at net 38 percent, up 5 percentage points from the previous quarter and the highest since the third quarter of 2015.

The global survey was conducted among 2,600 businesses in 37 economies, it said.

“There is a striking split in the direction of travel between business leaders in emerging and developed Asia-Pacific countries,” said Marivic Españo who is chair and CEO of Grant Thornton’s local partner Punongbayan & Araullo. “Part of the reason for this could be the likely scrapping of the Trans-Pacific Partnership, out of which developed economies—like those of Australia and New Zealand—stood to gain the most.”

“However, China is looking to implement its own regional economic partnership, which could fill some of that gap,” she said. “The high levels of optimism in emerging economies reflect what can happen when closer economic ties are in place, with the Asean Economic Community agreed in 2015.”

“Globally, the increase in optimism reflects a view among the business community that uncertainty over the outcome of major events like the EU referendum and the US presidential election is now behind them. Knowing the results will allow businesses to have a clearer steer on key issues such as taxes, jobs and trade policy.”

Findings from Grant Thornton’s survey reveal that across the Asia-Pacific region as a whole, the outlook on a number of key indicators is strong heading into 2017.

The proportion of firms expecting profitability to increase over the next 12 months has gone up to 34 percent, the highest in almost two years. Profitability in the Philippines has increased from 58 percent in the third quarter to 72 percent in the fourth.

Employment expectations remain healthy at 29 percent, and research and development plans for 2017 (31 percent plan to increase investment) are higher than this time last year (23 percent)—but down from the 32 percent recorded in the third quarter.

“There will be challenges in 2017, including the impact of further rate rises from the US Federal Reserve,” Españo said. “But these shouldn’t mean that growth plans across the Asia-Pacific should be abandoned.”