Business Sentiments Improving Further
The sentiments of Filipino businessmen are improving. More companies are turning more bullish this year as inflation rate softened and consumer demand picked up, in line with last year’s forecast.
Businesses actually did very well last year and I expect them to do better in 2019 when economic headwinds are not as challenging. Remember that the inflation rate, a major concern in 2018, returned to the government’s target range of 2 percent to 4 percent in the first quarter this year.
A survey by the Bangko Sentral ng Pilipinas supports this optimistic view. Results of the quarterly Business Expectation Survey of the BSP show that confidence in the economy improved in the first quarter. The overall confidence index of businessmen climbed to 35.2 percent in the first quarter from 27.2 percent in the fourth quarter of 2018.
The index snapped four consecutive quarters of decline, showing the number of optimists increased and exceeded the number of pessimists.
Respondents traced their more upbeat outlook this year to expectations of more business activities at the start of the campaign period for the forthcoming midterm elections; increased orders and consumer purchases with the easing of inflation; higher government infrastructure spending with the “Build, Build, Build” program of the current administration; introduction of new and enhanced business strategies and processes; and expansion of businesses and new product lines.
Respondents were also optimistic “their business operations would benefit from the favorable macroeconomic conditions in the country given the lower inflation and interest rates.”
The BSP said the sentiment of businesses in the Philippines mirrored the more positive business outlook in Chile, Greece, Israel, Mexico, the Netherlands and South Korea. Business sentiments in Australia, Brazil, China, Hong Kong, Singapore, Thailand, the UK and the US were less buoyant.
In terms of outlook, respondents are also more bullish for the second quarter, as the CI rose to 52 percent from 29.4 percent in the previous survey. “This next quarter reading is the highest since Q4 2016,” the BSP said.
With greater confidence, businesses intend to hire more in the next quarter, according to the survey results. The employment outlook index for the next quarter improved to 29.7 percent from 21.8 percent in the previous survey. “This indicates that the number of firms with hiring intentions increased relative to a quarter ago,” the BSP said.
I had a chance to talk to several top businessmen and all of them share the same enthusiasm. They are increasing their capital expenditure budget this year to support expansion. Everybody seems to be looking at ramping up their business activities and exploring new areas for growth.
In fact, the Board of Investments reported that it approved P243 billion worth of new investment projects in the first quarter of 2019, up 60 percent from P152.1 billion in the same period last year. The BOI now looks at attracting P1 trillion worth of new projects in the whole of 2019.
Both foreign and local investors are aggressive this year. Investment pledges from foreign companies surged 3,787 percent in the first quarter to P30.8 billion from only P792.8 million a year ago.
Domestic investments approved by the BoI also increased 40 percent in the three-month period to P212.2 billion from P151.3 billion a year earlier.
Trade Secretary Ramon Lopez, who also serves as the BOI chairman, said: “After generating a record-breaking P915 billion in approved investments last year, we are still sustaining the momentum this year due to steady, strong and positive investor sentiment here and abroad.”
Some Filipino businessmen even intend to expand overseas, anchored by vibrant businesses in the Philippines.
The World Bank, meanwhile, expects the Philippine economy to grow 6.4 percent in 2019, 6.5 percent in 2020 and 6.5 percent in 2021. It said the economy would remain resilient amid the domestic and external headwinds.
World Bank Country Director Mara Warwick said the growth outlook for the Philippines remains positive, as higher private consumption due to lower inflation, steady growth of remittances and election spending will fuel growth this year.
This, to me, is a sign of a vibrant economy and gives me optimism that we will continue to sustain a high level of growth in the coming years.