Businesses optimistic in Q4; buoyant in quarters ahead

·3 min read

OUTLOOK of business owners on the economy turned optimistic as the overall confidence index reverted to the positive territory at 39.7 percent, the highest level since the onset of the Covid-19 pandemic, the latest survey of the Bangko Sentral ng Pilipinas (BSP) revealed.

The respondents’ optimism was attributed to the easing of Covid-19 restrictions and opening of borders, increase in demand and sales, continuous vaccine roll out, leading to herd immunity, seasonal factors, such as the uptick in demand during the holiday season, and start of mining and milling seasons, as well as decreasing number of Covid-19 cases.

The BSP said the improvement in the third quarter economic performance may have also influenced the more sanguine business expectations.

For the first quarter in 2022, the survey showed the business sentiment further improving as the overall consumer index (CI) increased to 52.8 percent from 31.9 percent a quarter ago.

For the next 12 months, business sentiment was more optimistic as the overall CI increased to 67.6 percent from previous quarter’s survey result of 56 percent.

Optimism in trading firms

Optimism prevailed across the different types of trading firms (i.e., exporter, importer, dual-activity and domestic-oriented) in the fourth quarter of 2021.

Importers and domestic-oriented respondent firms turned optimistic, while exporters and dual-activity firms were more confident.

For the first quarter of 2022, the outlook across all types of trading firms was more buoyant as the indices were higher compared to the third quarter 2021 survey results. Moreover, for the next 12 months, the CIs of all types of trading firms reached record highs.

Outlook of all sectors

All sectors indicated a more positive outlook for their sectoral performance in the fourth quarter of 2021 as the CIs turned positive for firms from the construction, services and wholesale and retail trade sectors and more positive for the industry sector.

For the first quarter next year, business outlook across all sectors was more bullish. Likewise, the CIs across all sectors for the next 12 months reached all-time highs.

Firms’ outlook on their business operations is optimistic. This positive outlook emanated from the hopeful views of firms on higher volumes of business activity and total orders booked. The same upbeat expectations were recorded for the first quarter of 2022 and the next 12 months as well.

Hiring, expansion

The survey also revealed that the employment outlook index climbed to 24.5 percent for the first quarter of 2022 (from 6.2 percent in the third quarter 2021 survey results) and was higher for the next 12 months at 32.4 percent (from 24.3 percent).

The BSP said these higher positive readings suggest that firms are looking forward to hiring more people in the first quarter next year and the next 12 months.

Moreover, the percentage of businesses with expansion plans in the industry sector rose to 23.2 percent for the first quarter of 2022 (from 9.6 percent in the third quarter 2021 survey results), but slightly declined to 26.8 percent for the next 12 months (from 27.3 percent).

Weaker peso, higher borrowing

The survey results also showed that businesses expect the peso to continue to depreciate against the US dollar and peso borrowing rates and inflation to rise in the fourth quarter of 2021, first quarter of 2022, and in the next 12 months.

Further, businesses expected that inflation will breach the upper end of the government’s two to four percent inflation target range for 2021 and 2022.

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