Business confidence up in Q2 ‘14

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MANILA – – Philippine businesses turned more optimistic on the over-all economy in the second quarter of 2014 compared to the previous quarter tracking those in the US, UK, Canada, Germany, Hong Kong, Singapore and South Korea

Results of the Bangko Sentral ng Pilipinas (BSP) Business Expectations Survey (BES) for the quarter showed that confidence index (CI) rose to 50.7 percent from quarter-ago’s 37.8 percent.

The improvement in the index was attributed to robust consumer demand during the secondary harvest season, graduation and enrolment periods, which increase demand for school supplies among others; and the summer season, which translates to more tourist arrivals and consumption spending.

Other factors for this positive developments are the putting up of new construction projects in line in the Eastern Visayas rehabilitation bid among others, the higher orders and new contracts that in turn leads to higher volume of production, business expansion, launch of new products vis-à-vis recovery in the advanced economy like the US, and continuing confidence in the Aquino administration.

“The country’s strong macroeconomic fundamentals such as manageable inflation and steady growth of remittances as well as more favorable external conditions with the recovery of global markets support the positive business outlook,” the central bank said.

Despite the improvement in the BES index, it is lower than year-ago’s 54.

9 percent, a similar trend as those in China, New Zealand and India.

Similarly, the index for the next quarter slightly went down to 48.9 percent against the 50.8 percent in the previous survey.

The central bank, on the other hand, cited that investors remain bullish on the economy despite the lower CI partly because of “more optimistic outlook of firms in the wholesale and retail trade and construction sectors given their expectations of brisker demand at the start of the school year and new expansion projects in power generation, telecommunications and building of highways.”

“However, optimism was dampened by expectations of firms engaged in manufacturing and hotel and restaurant services of slack in demand during the rainy season,” it said.

Ask on selected economic indicators, the respondents said they expect inflation to go up but remain within the government’s three to five percent target for 2014 with the increase attributed to expectation in utility rate hikes and weather-related increase in food prices.

On the other hand, the respondents who said they expect the peso to appreciate against the US dollar until the third quarter of the year increased because of “anticipation of sustained inflows of foreign exchange from overseas Filipino remittances, foreign portfolio and direct investments, and merchandise exports.

Relatively, businessmen expect the interest rates to go up in the coming moths.

The survey was done from April 1-May 14, 2014 and were participated in by 1,529 firms around the country that belong to Securities and Exchange Commission’s Top 7,000 Corporations in 2010 and Business World’s Top 1000 Corporations in 2012.