El Niño, global headwinds sour business sentiment for Q1 2016
BUSINESS sentiment soured under the latest survey conducted by the Bangko Sentral ng Pilipinas (BSP) in the first quarter, with businessmen anticipating a dip in the economy’s performance as consequence of so- called local and global headwinds.
In the survey, the BSP said business optimism weakened in the January-to-March period, with the overall confidence index (CI) declining to 41.9 percent.
This marks a significant decrease from the 51.3 percent CI in the fourth quarter last year, when the so- called CI averaged 6.3 percent for the quarter.
The CI is computed as the percentage of optimistic firms minus the percentage of pessimistic firms looking at the local economy. A higher CI means the number of optimists proved greater than the number of pessimists for the period.
The BSP reported respondents who held less sanguine outlook of the economy on quarter- onquarter basis was due to seasonal factors, such as the postholiday slowdown in business activity. The adverse effects of El Niño on crop production and on businesses were also part of the seasonal factors behind the drop in confidence.
Local firms were also concerned with the topsy-turvy external sector, whose volatility could unduly impact the local scene, including worries on the outlook for global growth given continued weakness in China and the decline in global oil prices and other commodities.
Businesses have also adopted a wait-and-see attitude with regard to the outcome of the 2016 national and local elections.
Strong market competition and the bearish trend of the Philippine stock market also weighed rather heavily on their outlook in the first quarter.
The sentiment of businesses in the Philippines mirrored the less sanguine business outlook in the United Kingdom, Germany, China and South Korea, but was in contrast to the views of firms in the United States, Canada, France, the Netherlands and Russia. Across various sectors, firms in the services and wholesale and retail trade sectors were less favorable compared to that in the fourth quarter of 2015, while the sentiment of construction-related firms was steady. Industrial firms, meanwhile, were more buoyant. For the next quarter, businesses turned more optimistic, with a CI rising to 49.6 percent. “The next quarter confidence index suggests that economic growth could be higher for the next quarter,” the BSP said.
Among the factors that spurred the optimism of firms in the second quarter this year include electionrelated spending; sustained increase in orders and volume of production; increase in demand during summer with higher influx of tourists; and expansion of new product lines for the quarter.