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Business confidence down to 3-year low

11 September 2017

The central bank’s latest Business Expectations Survey (BES) showed business confidence index for the third quarter of 2017 plunged to 37.9 percent from 43 percent in the previous quarter.

This was the lowest recorded since the third quarter of 2014 when confidence index reached 34.4 percent.

However, the Bangko Sentral ng Pilipinas (BSP) said that while businesses have a less optimistic view of the Philippine economy, the overall sentiment remains positive.

According to Mariel Remulla, deputy director of BSPs’ Department of Economic Statistics, said the survey respondents cited the following reasons for the lower confidence level:
• seasonal factors such a slowdown in business activities during the rainy season, reduced demand during the planting and closed milling season, and the closed fishing season in the Davao Gulf from July to September;
• the Marawi crisis and the declaration of martial law in Mindanao, which had affected mobility;
• the peso’s depreciation;
• higher prices;
• stiffer competition; and
• damages and power outages caused by the July 6 earthquake in the Visayas.

“The sentiment in the businesses in the Philippines mirrored the less buoyant business outlook in the US, Canada, The Netherlands, New Zealand, and Thailand but was in contrast to the more bullish views of those in Germany and Hong Kong and steady outlook in France,” Remulla added.

On the other hand, she said that sentiment for the next three months improved to 51.3 percent from 42.7 percent during the previous survey.

The BSP attributed the increased optimism to the following:
• an expected uptick in consumer demand during the holiday, harvest and milling seasons;
• the rollout of government infrastructure and other development projects;
• continued increases in orders and projects, which would lead to higher production volumes;
• business expansion and new product lines;
• the introduction of new and enhanced business strategies and processes;
• favorable weather conditions for agriculture; and
• a positive impact from the government’s proposed tax reform program. The latest BES, which polled 1,480 companies nationwide, was conducted from July 3 to Aug. 18. The survey results are considered indicative of the direction of business activity.

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