FILIPINO firms became less optimistic about the economy in the third quarter of 2023, according to the Bangko Sentral ng Pilipinas (BSP).
Based on the results of the BSP’s Business Expectations Survey (BES), the overall confidence index (CI) declined to 35.8 percent from 40.8 percent in the second quarter of 2023.
However, BSP said business sentiment for the last quarter of 2023 and the next 12 months was more upbeat as the overall CIs increased from the previous quarter’s survey results.
“The firms’ less optimistic sentiment in the current quarter was attributed to: [a] decline in sales and demand for goods and services, mainly due to weather-related disruptions and other seasonal factors, [b] higher prices of raw materials and production costs, [c] elevated inflation and interest rates and [d] peso depreciation,” BSP said.
“However, the business sentiment for the fourth quarter of 2023 and the next 12 months was more upbeat as the overall CIs increased from the previous quarter’s survey results,” it added.
In the third quarter, BSP data showed that the confidence index of the industry, services, and wholesale and retail trade sectors declined, while that of the construction sector increased.
The data also showed that importers, exporters, dual-activity, and domestic-oriented firms were less optimistic in the current quarter.
BSP also said the average capacity utilization in the industry and construction sectors for the third quarter of 2023 decreased slightly to 70.5 percent from 71 percent in the second quarter of 2023.
“Firms expected their financial condition and access to credit to be less tight for the third quarter of 2023 as their corresponding indices became less negative,” BSP said.
Optimistic for second half
Meanwhile, businesses were more optimistic for the second semester of the year and in the next 12 months.
While they expect inflation to increase in the last two quarters of the year, it is expected to slow in the next 12 months.
BSP said businesses expect that the inflation rate may average 5.9 percent for the third quarter and fourth quarter of 2023 and at 5.7 percent for the next 12 months.
“Although businesses expect that inflation may remain above the upper end of the National Government’s 2-4 percent inflation target range for 2023-2024, inflation expectations among businesses may further ease in the next 12 months as the number of respondents who expected lower inflation outnumbered those who said otherwise,” BSP explained.
The BSP noted that the third quarter BES was conducted during the period 5 July-15 August 2023.
There were 1,549 firms surveyed nationwide, consisting of 583 companies in the NCR and 966 firms in AONCR, covering all 16 regions nationwide. Samples were drawn from the Top 7,000 Corporations ranked based on total assets in 2016-2017 from the Bureau van Dijk (BvD) database.
The nationwide survey response rate for this quarter was higher at 64.9 percent (from 59.4 percent in the second quarter 2023). The response rate was higher for both the NCR at 63.8 percent (from 57.8 percent) and AONCR at 65.5 percent (from 60.4 percent).
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