Omicron dampened firms’ bullishness in Q1
Business confidence in the first quarter of 2022 remained bullish, but less so due to the surge in COVID-19 infections involving the Omicron variant, according to the Bangko Sentral ng Pilipinas (BSP).
The latest BSP quarterly Business Expectations Survey was conducted from Jan. 21 to March 4. Covered were 1,498 firms nationwide, including 578 companies in Metro Manila.
Respondents belong to the top 7,000 corporations ranked based on total assets in 2016 from the Bureau van Dijk (BvD) database.
Results show that the overall confidence index waned to 32.9 percent in the current quarter from 37.9 percent in the previous period.
“The lower positive index resulted from the combined effects of a decrease in the percentage of optimists and an increase in the percentage of pessimists,” the BSP said.
“The respondents’ less buoyant outlook was largely affected by the resurgence of cases from the new Omicron variant and the consequent reimposition of stricter quarantine restrictions in many areas at the beginning of the year,” it added.
Also dampening business confidence were the increase in prices of raw materials and fuel; decrease in demand for certain goods and services such as motor vehicles, education services, and construction; weakening peso; and adverse impact of natural calamities, particularly the devastation from Typhoon “Odette” last December. Regarding expectations for the next quarter, the overall confidence index was more upbeat at 59.7 percent compared to 52.8 percent in the fourth quarter of 2021 when the number of new COVID-19 infections were also high.
Improved outlook
The index also improved regarding the next 12 months ahead, rising to 69.8 percent from 67.6 percent in the previous quarter’s result.
The BSP said this was the highest reported confidence index for the next 12 months since the survey started to collect outlook for the next 12 months in the third quarter 2019. Overall, the outlook across sectors turned less optimistic in the first quarter of 2022 as the indices dropped for firms in the industry, construction, services and the wholesale and retail trade sectors.
For the coming quarter, the business outlook was more bullish for all sectors except the construction sector.
Similarly, indices across all sectors for the next 12 months —except for the industry sector—recorded all-time highs in the latest survey. In the latest survey, the average capacity utilization of the industry and construction sectors decreased slightly to 70.2 percent from 70.6 percent in the previous quarter. At the same time, the financial conditions index turned less negative at -19.1 percent currently from -22.4 percent previously. Further, the employment outlook index for the next quarter inched up to 24.7 percent from 24.5 percent. However, the hiring outlook for the next 12 months was at 28.9 percent from 32.4 percent.
This suggests that firms are looking forward to hiring more people in the next quarter, but less so in the next several months.
Also, businesses expect that the peso may depreciate against the US dollar in the next three months, but begin to appreciate in the next 12 months.
“Businesses are expecting that inflation will settle at 4.2 percent for the first half of 2022 and in the next 12 months, which is slightly higher than the upper end of the government’s 2 to 4 percent inflation target range for 2022,” the BSP said.
