Economic headwinds bring sentiment down
Soaring consumer prices, the weakening peso, corporate tax reform fears, economic headwinds overseas, plus the political noise domestically all seem to be bringing down business sentiment in the country.
Optimism on the country’s economic prospects may have turned gloomy as economic headwinds have persisted.
"With all the events that are unfolding, business sentiment is really down," Mandaue Chamber of Commerce and Industry vice president Steven Yu told The FREEMAN in a phone interview yesterday.
On Thursday, the Bangko Sentral ng Pilipinas reported that optimism fell among businessmen during the July to September period, with business confidence falling to its lowest level since the first three months of 2010, based on its latest survey.
"It seems that the issues are raining down on us, in a series of sequences," Yu lamented.
Inflation surged to a nine-year high of 6.4 percent year-on-year in August, beating all estimates and raising concerns that consumer confidence might dip further and business sentiment could fall.
It was also a bad day for the peso yesterday when it flirted with the P54-to-$1 level in early trading Friday, weighed by the trade tension between the US and China and the nine-year high August inflation.
The peso yesterday hit an intra-day low of P53.975:$1.
The last time the peso touched the P54-level was on Dec. 2, 2005 at P54.155.
"The timing is against us. But it is not a gloom and doom scenario," MCCI's Yu said.
"We had been here before and it is just that we are used to low interest rates and a soaring economy," he further explained.
Yu pointed out businesses are scaling back their expansion plans at the moment due to the economic issues weighing down on prospects.
"Now, we have to tighten our belts, scale back the scope of our expansions and take lesser risks. Businesses will survive but SMEs (small and medium enterprises) will be the hardest hit," the businessman said.
The MCCI official urged the government to immediately address the headwinds posing risks to economic growth.
"With proper government intervention, we still have the chance of getting back to positive momentum by end of next year," Yu said.
The BSP's Business Expectations Survey showed the confidence index declined to 30.1 percent in the third quarter from 39.3 percent in second quarter and 39.5 percent in the first quarter.
The top reason for the weaker sentiment, the central bank said, was rising prices of basic commodities in the global market, boosted by the impact of the Tax Reform for Acceleration and Inclusion (TRAIN) Law on prices of domestic goods.
Other factors were the rising overhead costs, the weakening peso, lack of supply of raw materials, and stiffer competition, among others.
Survey respondents expect inflation to remain above target for 2018, borrowing costs to move up, and the peso’s value against the dollar to move down.