Business confidence falls to 3-year low

The rainy season, the ongoing conflict in Marawi City and the depreciation of the peso pulled down the business sector’s optimism in the third quarter to its lowest level in three years, the Bangko Sentral ng Pilipinas reported yesterday.

The latest business expectations survey showed that the overall confidence index (CI) dropped to 37.9 percent during the July-to-September period, the lowest since the 34.4 percent posted in the third quarter of 2014.

The still positive CI nonetheless meant that the number of optimistic businesses outnumbered the pessimists.

The BSP said survey respondents attributed their less buoyant outlook to the seasonal slowdown in business activities due to the rainy season, the slack in demand during the planting and closed milling season, and the closed fishing season in Davao Gulf during the three-month period.

Respondents were also less optimistic due to the fighting between government forces and ISIS supporters in Marawi City that led to the declaration of martial law in Mindanao last May, which the BSP said “affected people’s mobility to and in” the war-torn island.

Respondents also blamed the weaker peso, which slid to 11-year lows in late-June.

The BSP also said the other reasons for the dampened optimism included rising prices of basic goods, stiff competition among businesses as well as damage and power outages due to the earthquake that hit the Visayas in July.

But for the fourth quarter, business optimism was more positive as the next quarter CI climbed to 51.3 percent from 42.7 percent in the previous quarter.

In general, businesses expect more rosy prospects during the October-to-December period due to the Christmas holiday season.

The BSP also noted that the fourth quarter marked the harvest and milling seasons, auguring well for the agriculture sector.

The other reasons for the more optimistic outlook for the last three months of the year included the following: Continued rollout of government infrastructure and development projects; sustained increase in orders and projects translating to higher production volumes; business and new product line expansions, and the planned introduction of new and enhanced business processes and strategies, the BSP said.

The BSP added that expectations of a more favorable weather for agricultural goods and the expected positive impact of the proposed comprehensive tax reform program made businesses look forward to the fourth quarter.