Improved second quarter outlook shortlived as PH firms turn bearish for rest of 2020

Philippine businesses are more optimistic about the second quarter of 2020 after a challenging first three months which saw the country plunged into the COVID-19 pandemic along with the rest of the world, according to the latest business confidence survey of the Bangko Sentral ng Pilipinas (BSP).

In a statement, the central bank said that business outlook was more favorable for the current April-June quarter as the confidence index rose to 42.3 percent from 40.3 percent in the previous quarter.

“Respondents’ more buoyant outlook was associated with expectations of in increase in orders or sales,” the BSP said.

These orders or sales were seen in the community, finance, business and trade sub-sectors, it said.

Other sources of confidence are the usual increase in demand during the summer months, enrolment in schools, harvest season, new or enhanced business strategies, expansion of businesses and higher infrastructure spending by the government.

The results of the quarterly survey also revealed that business outlook on the country’s economy was less upbeat for the next 12 months as the confidence index declined to 55.8 percent from 59.6 percent in the previous quarter.

The less optimistic outlook of respondents for the next 12 months was attributed to projections of negative impacts of the Taal eruption, the pandemic, rice tarrification, price caps on medicines and possible safeguard duties on imported vehicles.

For the current quarter, the outlook of exporters and domestic-oriented firms was more buoyant on expectations of higher consumer demand during the summer and harvest seasons, new product lines and business opportunities, recovery from the COVID-19 pandemic and increase in government spending.

However, importers and dual-activity firms’ outlook was less positive due to the anticipation of decline in sales, implementation of the price cap in selected medicines and concerns over the problem between China and Hong Kong.

However, outlook of exporter firms was more upbeat due to expectations of an increase in volume of production due to business expansion.

The employment outlook index, meanwhile, was steady for the second quarter of 2020 at 16.9 percent from 16.6 percent, but was lower for the next 12 months at 30.8 percent from 34.5 percent as compared to the last quarter’s survey results.

According to the central bank, the sentiment of businesses in the Philippines mirrored the less optimistic business outlook in Brazil, Canada, Croatia, Germany, Hungary, Israel and the United States.

Edited by TSB