Fewer firms eye expansion

Fewer companies have signified their interest to pursue expansion plans in the fourth quarter and are likely to hire new workers, results of a survey conducted by the Bangko Sentral ng Pilipinas (BSP) showed.

Redentor Paolo Alegre, director of the BSP’s Department of Economic Statistics, said the result of the latest Business Expectation Survey (BES) showed the percentage of businesses with expansion plans for the next quarter slipped to 30.4 percent from the previous quarter’s 33.5 percent.

Alegre said the percentage of companies with expansion plans for the fourth quarter declined across all sectors.

“Weaker expansion plans were recorded across the industry sub-sectors” he said.

On the other hand, Alegre said the employment outlook index for the next quarter further slipped to 19.6 percent from the previous quarter’s 26 percent, suggesting the number of new hires may be lower.

“This suggests that more firms will continue to hire new employees, although the number that said so are lower compared to the previous quarter’s survey,” he said.

According to Alegre, employment prospects were generally expected to moderate across sectors, except for the wholesale and retail trade sector, which was higher.

“Employment outlook remains positive, while expansion plans are lower,” he said.

Business outlook on the economy turned less optimistic for the third quarter as the overall confidence index slipped to 37.3 percent from 40.5 percent due to seasonal factors such as slack in the demand and slowdown of business activities during the rainy season, decline in orders leading to lower sales, lack of supply of raw materials, perceived unfavorable effects of various government policies such as rice tariffication law, and the banning of provincial buses on EDSA.

He said major constraints of the third quarter BES conducted from July 10 to September include domestic competition and insufficient demand leading to low sales volume as indicated by 53.1 percent and 25.1 percent of the total number of respondents, respectively.

However, he added the percentage of respondents’ whose operations were affected by business constraints showed a broadly declining trend since the start of the nationwide survey in the fourth quarter of 2006.

Alegre said firms are also expecting a stronger peso, lower inflation and interest rates for the third quarter.

Respondents, he added, see the peso strengthening to 51.8 to $1 in the third quarter and to 51.7 to $1 in the fourth quarter.

Furthermore, they expect inflation to ease further to 3.4 instead of 3.9 in the third quarter, and to 3.5 instead of four percent in the fourth quarter.

Inflation averaged three percent in the first eight months of the year after easing to a 35-month low of 1.7 percent in August from 2.4 percent in July.

The BSP’s Monetary Board has so far slashed interest rates by 50 basis points due to lower oil and food prices as well as stronger peso.

It would be recalled the central bank raised interest rates by 175 basis points last year as inflation accelerated to 5.2 percent from 2.9 percent in 2017 due to elevated oil and food prices as well as weak peso.