Business confidence lower in Q1

FOLLOWING robust sales during the Christmas holidays, the slack in demand in the first quarter alongside worries over the upcoming elections as well as external developments tempered businesses’ optimism, results of the Bangko Sentral ng Pilipinas’ latest Business Expectations Survey (BES) showed.

The BES’ overall confidence index (CI) slid to 41.9 percent during the first quarter from 51.3 percent in the fourth quarter of 2015, which meant that the number of optimists dropped even as they were still more than the number of pessimists, the BSP noted in a statement Friday.

The BSP attributed respondents’ “less upbeat” quarter-on-quarter outlook mainly to the “usual slowdown in business activity and moderation of consumer demand after the holiday season.”

Respondents also cited as reasons for the dip in business confidence the “wait-and-see” attitude they were adopting ahead of the presidential elections in May, coupled with expectations that the dry spell due to El Niño would adversely affect crop production.

Businesses were likewise worried over the continuous drop in global prices of oil and other commodities, alongside “growing concerns about the outlook for global growth amid continued weakness in China,” the BSP said.

Also blamed for the decline in optimism were strong market competition as well as the bearish trend of the Philippine stock market.

Businesses were nonetheless more confident about prospects in the next quarter as the CI was seen increasing to 49.6     percent for the second quarter, compared with the 43.9 percent posted during the survey conducted in the fourth quarter of last year.

The higher CI for the second quarter “suggests that economic growth could be higher for the [that] quarter,” the BSP said.

According to the BSP, respondents were more bullish for the April-to-June period primarily due to the following: Election-related spending in the run-up to the elections; sustained increase in orders and projects that will jack up production volumes, and expected rise in demand during summer amid an influx of local and foreign tourists as well as during the enrollment period before classes start in June.