PH business leaders more optimistic in Q2– survey

MANILA, Philippines–Filipino business leaders turned more upbeat in the second quarter and even ranked second highest globally in having the proportion of optimists among their peers, based on the latest quarterly survey of Grant Thornton International Business Report.

But this improvement in optimism is not immediately expected to translate to higher revenues or creation of new jobs, based on the same report.

The survey, which was conducted around the time when then Chief Justice Renato Corona’s impeachment trial was drawing to a close, also showed little impact of the tension between the judiciary and executive branches on their day-to-day business.  Of the respondents, 84 percent said it has no impact, up from last quarter’s ratio of 78 percent.

The latest results, released by audit, tax and advisory services firm Punongbayan & Araullo (P&A) on Monday, showed the Philippines at the number two spot of the optimism league table with a “balance” of 90 percent–just behind Peru’s 96 percent and at par with Chile’s ratio.

Percentage “balance” is defined by the Grant Thornton study as the proportion of companies reporting that the optimistic trend has increased less those reporting it has decreased.

P&A noted that the Philippines had posted an eight-point increase in optimism from the previous quarter despite tepid expectations for key economic indicators, such as profitability and revenue.

In the previous quarter’s survey, the Philippines was in fourth place, behind Peru (90 percent), Brazil (86 percent) and the United Arab Emirates (84 percent).

For the second quarter, a balance of 40 percent of local respondents expected increased profitability, just about the same as last quarter. When it comes to expectations for revenue improvement, however, the balance dropped from last quarter’s 48 percent to 44 percent. But the proportion of businesses expecting to hike prices jumped to 30 percent from last quarter’s 14 percent.

“The drop in revenue expectations could be due to businesses expecting a reduction in sales volumes as a result of price increases,” said Marivic Españo, P&A’s chair and chief executive officer.

“Costs attendant to doing business, such as oil prices for example, which were on the high end at the start of the second quarter, are normally passed on to consumers, so business leaders are naturally looking at a drop in volume sales.”

P&A said another noticeable trend was the drop in employment expectations. Last quarter, a balance of 42 percent of businesses expected to add to their personnel numbers but that proportion has been reduced to 28 percent this quarter.

On the bright side, the report noted that Filipinos who are already employed can expect to be aptly compensated for the next 12 months. An overwhelming majority of the respondents–80 percent–plan to increase salaries either in line with inflation or by more than inflation, and none of the businesses intend to reduce pay.

“You expect business leaders to adjust where they can consider the new realities of their operations,” Españo said. “Unfortunately, this quarter that adjustment involves holding off on hiring more people and instead focusing on coming up with competitive pay packages for their existing team.”

Asked about their business constraints, 32 percent of Filipino business leaders cited information and communications technology (ICT) as a major roadblock to their growth. Shortage of long-term finance and shortage of working capital also saw big jumps in the percentage of respondents citing the two as major constraints–from 6 percent last quarter to 18 percent, and from 12 percent last quarter to 22 percent, respectively.

The Grant Thornton International Business Report provides insight into the views and expectations of over 12,000 businesses per year across 40 economies. This survey draws upon 20 years of trend data for most European participants and 10 years for many non-European economies.

IBR is a survey of both listed and privately held businesses. The data for this release are drawn from interviews with 3,000 businesses from all industry sectors across the globe conducted in May to June 2012. The target respondents are chief executive officers, managing directors, chairmen or other senior executives.