Survey: Business optimism slightly down in Q2

The country’s business sector was less optimistic in the second quarter due to higher consumer prices, the Bangko Sentral ng Pilipinas (BSP) said Thursday.

Deputy Governor Diwa Guinigundo noted, however, that while the implications of the Tax Reform for Acceleration and Inclusion (TRAIN) law were cited as the cause of the decline in optimism, TRAIN was not directly cited by survey respondents.

Results of the central bank’s Business Expectations Survey (BES) showed the overall confidence index (CI) fell to 39.3 percent.

This compares with the 39.5 percent in the first quarter of the year, and the 43.0 percent in the second quarter of 2017.

This is the lowest since the CI was recorded at 39.4 percent in the first quarter of 2017.

The optimism was tempered by at least three factors, BSP Department of Economic Statistics Head Redentor Paolo Alegre Jr. said in a press conference in Manila.

“This was due to expectations of higher consumer prices, due to higher oil prices and the peso depreciation,” Alegre said.

“I think the only difference between then and now is the implementation of the TRAIN (Tax Reform for Acceleration and Inclusion) law and corresponding implications, consequence, particularly on prices,” Guinigundo noted.

TRAIN was signed into law by President Rodrigo Duterte in December, reducing the personal income tax rate and expanding the value-added tax (VAT) base.

In terms of the coming quarter, the respondents were mixed.

“Exporters and dual-activity firms anticipated that the volume of production and orders would be sustained for the next quarter, resulting in a steady outlook,” the report read.

“Meanwhile, importers and domestic-oriented firms were less optimistic as they noted that their operations could be adversely affected by the seasonal slack in domestic demand, stiffer competition, rising fuel prices, and possible foreign exchange losses due to the peso depreciation,” it said.

The Q2 2018 BES was conducted from April 2 to May 22, 2018, and included 1,466 firms nationwide.

Respondents were drawn from the combined list of the Securities and Exchange Commission's (SEC) Top 7,000 Corporations in 2010, and the Top 1000 Corporations published by BusinessWorld.