Business sentiment is more buoyant in the second quarter and the next 12 months due to easing off restrictions, economic reopening, higher sales and increased activity due to the May elections, according to a report from the Bangko Sentral ng Pilipinas.
BSP added that respondents of the Business Expectations Survey (BES) were more upbeat for the next 12 months, citing (a) the easing of COVID-19 quarantine restrictions; (b) the further reopening and improving state of the economy; (c) an uptick in the volume of demand and sales; and (d) an increase in economy activity due to the upcoming elections.
“The respondents’ optimism for the next quarter was attributed primarily to the expectations of: (a) a decline in the number of COVID19 cases; (b) the further easing of community quarantines; (c) an improvement in economic conditions and prospects of a recovery from losses incurred during the stricter community quarantines; (d) the increase in volume of sales and orders; and (e) an increase in economic activity due to the upcoming elections,” the government report said.
BES is a quarterly survey of firms drawn at random from the list of Top 7,000 Corporations ranked based on total assets in 2016 from the Bureau van Dijk database.
Bureau van Dijk is a major publisher of business information, and specialize in private company data combined with software for searching and analyzing companies. It is a Moody’s Analytics company.
There were 1,498 firms surveyed nationwide, consisting of 578 companies in NCR and 920 firms in areas outside of NCR, covering all 16 regions nationwide.
BSP said results of the BES provide advance indication of the direction of the change in overall business activity in the economy and in the various measures of companies’ operations as well as in selected economic indicators.
The first quarter 2022 BES was conducted during the period January 21 to March 4.
BSP said that business confidence, though still positive, weakened in the first quarter as the overall confidence index (CI) decreased to 32.9 percent from 39.7 percent in the fourth quarter of 2021.
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, the report said.
Other factors that contributed to the weaker business confidence in the first quarter were (a) increase in prices of raw materials and fuel; (b) decrease in sales/demand for certain goods and services (such as motor vehicles, education services, and construction); (c) weakening peso; and (d) adverse impact of natural calamities.
Despite the optimism, a less favorable outlook was observed across the different types of trading firms (i.e., exporter, importer, dual-activity, and domestic-oriented) as all types of trading firms registered lower CI in the first quarter.
“The less favorable outlook across all trading groups was primarily due the protracted negative effects of COVID-19 and its variants on household spending and mobility, high cost of raw materials, and the depreciation of the peso,” BSP said.
Meanwhile, the outlook for the second quarter of importers, dual activity firms, and domestic-oriented firms was more buoyant, while that of exporters was less optimistic.
Domestic-oriented firms continued to be more bullish for the second consecutive quarter, whereas importers and exporters turned bearish.
The report said the sentiment of medium-sized and large-sized firms was less buoyant, while that of small-sized firms was more bullish in the first quarter.
Outlook of firms across employment size improved in the second quarter.
The outlook across sectors turned less optimistic in the first quarter as the CIs dropped for firms in the industry, construction, services, and the wholesale and retail trade sectors.
The construction sector attributed their less optimistic view to the postponement and delays in construction projects due to the pandemic.
The services sector was also less buoyant due to the adverse effects of the ongoing COVID-19 pandemic, weak demand for services, and the seasonal decline in demand for trucking services during the first quarter of the year.
The outlook of wholesale and retail trade firms was less buoyant in the first quarter due to the increase in the price of basic commodities and fuel and the impact of the ongoing pandemic on consumer spending.
The BSP said business outlook for the second quarter was more bullish for all sectors, except the construction sector, whose sentiment turned less optimistic.
The more upbeat outlook of the firms in the industry sector was attributed to the easing of quarantine restrictions, improving management of COVID-19 pandemic by the national government, and the continuing period of the pandemic.
The services and wholesale and retail trade sectors pointed to the declining COVID-19 cases and easing quarantine restrictions as reasons for their more upbeat outlook for the next quarter
“Business confidence generally improved across all sectors as firms foresee a sustained decline in COVID-19 cases in the near term. Businesses also expect to benefit from post-election spending,” the BSP said.
The employment outlook index edged higher in the second quarter, but fewer firms plan to expand operations.
BSP said firms are looking forward to hiring more people in the next quarter, while the lower index for the next 12 months implies that firms are still looking to hire, but at a lesser degree, in the next several months.
Businesses are also 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.
Moreover, firms are anticipating that the peso-dollar rate will average at P50.9/US$1 in the first quarter (from P50.3/US$1), P51/US$1 for the second quarter (from P50.5/US$1), and P51/US$1 over the next 12 months (from P50.6/US$1).