Biz sentiment declines but outlook brighter for Q4

However, a Bangko Sentral ng Pilipinas (BSP) official said the outlook is brighter in the last quarter of the year. (File Photo: Bangko Sentral ng Pilipinas/Facebook)

MANILA — Business sentiment in the third quarter of 2018 slid to 30.1 percent, the lowest since the first quarter of 2010, from quarter-ago’s 39.3 percent due to inflation concerns, both domestic and global.

However, a Bangko Sentral ng Pilipinas (BSP) official said the outlook is brighter in the last quarter of the year.

Aside from higher commodity prices, respondents of the Business Expectations Survey (BES) for the third quarter this year also cited the impact of the first tax reform package or the Tax Reform for Acceleration and Inclusion (TRAIN), increase in cost and lack of supply of raw materials, interruption of business activities, and lower crop production due to the rainy season, weakening peso and stiffer competition as reasons for the business sentiment.

In a briefing Thursday, Redentor Paolo Alegre Jr., head of the BSP’s Department of Economic Statistics (DES), however, said outlook for the fourth quarter is better after the confidence index rose to 42.6 percent from 40.4 percent in the first quarter. “This suggests that growth may be sustained in the last quarter of 2018,” the report said.

Respondents attributed the brighter outlook next quarter to uptick in consumer demand due to the holidays, expansion of businesses and new products, continued roll-out of the government’s infrastructure program, and opening of fishing operations in October.

The central bank report said the positive outlook for next quarter was also attributed to expectations of more favorable macroeconomic conditions, sustained foreign investment inflows, and robust inflows of money being sent home by Overseas Filipino Workers (OFWs).

BES’ results have about 0.67 percent correlation to domestic output.

BSP Deputy Governor Diwa Guinigundo, during the same briefing, said that although results of the BES showed some downtrend, the factors surrounding it should be considered.

He said seasonal factors, such as the interruption of business activities and lower crop production, along with weaker consumer demand due to the impact of the start of a new school year, should be considered when looking at the third quarter BES. “This is a signal to the business sector that spending may not necessarily be directed towards the products and services that they produce,” he said.

Guinigundo said expectations of the business community is always on the high side but also noted that despite this, monetary officials need to study the results of the survey to be able to show the public that the central bank “will continue to be vigilant.“

The survey results also showed that the respondents expect the Peso to depreciate against the US dollar and the interest and inflation rates to go up.