Businesses in the Philippines are more bullish on investing more money this year. They plan to expand their operations or hire more employees because of one word―predictability.
When you have political stability and strong macroeconomic fundamentals in place, there is a strong chance that you will be able to predict not only the growth of the economy, but also your own revenue and profit performance.
Many companies, especially the publicly listed ones, now provide profit guidance at the start of the year because they are confident about how their bottom line would look like by the end of the year. This year, almost every businessman is bullish and has big plans for the future apparently to take advantage of the Philippines’s robust economic growth, which the World Bank expects to be at around 6.7 percent for both 2018 and 2019. The Philippine economy grew 6.8 percent in the first quarter, one of the fastest in the region.
In its latest Business Expectations Survey, the Bangko Sentral ng Pilipinas said the overall confidence index among businessmen remained steady at 39.3 percent in the second quarter, which means ‘optimists’ outnumbered ‘pessimists’ by 39.3 percent.
Among the factors behind the respondents’s optimistic outlook were increased orders and volume of production, rollout of government infrastructure projects under the ‘Build, Build, Build’ program, positive view on the TRAIN law, expansion of businesses and new product lines and sound macroeconomic conditions. Such optimism was slightly dented by expectations of higher consumer prices, partly due to oil price hikes and the peso depreciation.
The Philippines, being a member of the rapidly-growing Association of Southeast Asian Nations, is one of the countries that now attract a lot of investors. An inaugural business barometer survey conducted by the Oxford Business Group (OBG) in April 2018 pointed to ‘sky-high’ business expectations among Asean chief executives. As part of its research for its Asean survey, OBG asked over 550 C-suite executives from Indonesia, Malaysia, Myanmar, the Philippines, Thailand and Vietnam. Results of the survey showed that 72 percent of business leaders were likely or very likely to make a significant capital investment within the next 12 months.
Official data from the Philippine Statistics Authority (PSA) help explain the optimism shared by Filipino businessmen. Preliminary results of the Monthly Integrated Survey of Selected Industries showed that the volume of production index, or factory production, climbed 31.1 percent year-on-year in April 2018, faster than the 16.5-percent increase in March, 22.4 percent in February and 17.2 percent in January.
The National Economic and Development Authority attributed the growth in production to strong consumer demand and weaker exchange rate, which encouraged manufacturers to produce more this year.
Supporting the growth of manufacturing sector is the vigorous bank lending which surged 19.9 percent year-on-year in April. Loans to companies (production loans) increased 19.6 percent, while loans to households or individuals went up 19 percent.
Another reason for optimism is the low unemployment rate, which eased to 5.5 percent in April 2018 from 5.7 percent a year ago, as more Filipinos found jobs during the period. This was the lowest jobless rate for all the April rounds of the Labor Force Survey in the past decade, according to the PSA.
Neda said the infrastructure build-up by both the public and private sectors helped boost the number of Filipinos with jobs.
Neda also said businessmen are expected to remain bullish, with the implementation of the Ease of Doing Business Act of 2018 (Republic Act No. 11032) which seeks to streamline procedures, shorten processing time for government transactions and create a central business portal to receive and obtain data involving business-related transactions.
The Philippines has enjoyed continuous strong economic growth over the past 10 to 12 years and is in a position to sustain such expansion over the next decade. We will most likely join the group of upper middle-income countries in the next couple of years, as our per capita gross domestic product climbs above $3,000.
With a young and dynamic population, our country is now entering what an Asian Development Bank official described as “golden age of economic growth.” However, we need to spread this sense of optimism to our people by resolving the fundamental weaknesses in our society and ensuring a long period of stability that will continue to the next generations.