Pandemic, high inflation sap business optimism

Businessmen turned less confident about their prospects for the current quarter and will likely remain so over the next 12 months due to the lingering effects of the coronavirus pandemic, according to the latest survey of the central bank.

At the same time, the latest results of the quarterly Business Expectations Survey revealed that the country’s corporate leaders were also wary about the economic fallout from the prevailing high inflation rate, which was not expected to normalize until late 2021.

In a statement, the Bangko Sentral ng Pilipinas (BSP) said that optimism weakened for the third quarter as the overall confidence index decreased from previous quarter’s survey results. In particular, the confidence index for July to September declined to 31.4 percent from the previous quarter’s survey result of 42.8 percent.

The respondents’ less optimistic outlook was attributed primarily to [the] upsurge of COVID-19 cases, the reimposition of stricter community quarantine, particularly in the National Capital Region and its environs, and the elevated inflation rate due to supply constraints, the central bank said.

“Respondents also cited concerns over the pace of the vaccination rollout … as well as the expected seasonal factors for the third quarter of 2021 such as the close of the milling season and the usual slack in demand for power and construction materials during the rainy season as reasons for their less buoyant sentiment,” the agency added.

Economic outlook

Similarly, due to the same reasons, the business outlook on the country’s economy for the next 12 months was less upbeat as the confidence decreased to 52.5 percent from the previous quarter’s survey result of 60.5 percent.

The latest Business Expectations Survey was conducted from April 7 to May 27, 2021, among 1,513 firms nationwide, consisting of 585 companies in Metro Manila and 928 firms in provinces, covering all 16 regions nationwide.

The nationwide survey response rate for this quarter rose to 66 percent from 63.8 percent in the previous edition. The response rate was slightly lower for Metro Manila at 60.9 percent from 61 percent, but higher for provincial areas at 69.2 percent from 65.6 percent.

Across different industries

The central bank explained that the outlook over the next quarter and the next 12 months “generally wanes” across different types of businesses for surveys conducted during the second quarter of the year.

The central bank said less favorable sentiment generally prevailed across the different types of trading firms like exporters, importers, dual-activity companies and domestic-oriented ones. “For the third quarter of 2021 and the next 12 months, the weaker business sentiment persisted across the different types of respondent trading firms as the indices were lower than the [previous] survey results,” the agency said.

“For the third quarter and the next 12 months, the business sentiments of the industry, services, and wholesale and retail trade sectors weakened,” the BSP said. “Meanwhile, the outlook of the construction sector was more buoyant for the next 12 months, and was optimistic and broadly steady for the third quarter of 2021.” INQ