LOCAL businesses are not happy with their prospects given recent economic developments, as firms surveyed by the Bangko Sentral ng Pilipinas (BSP) complained about rising prices and higher taxes for the third quarter of the year.
Business outlook on the economy turned sour in July to September this year, with the quarterly Business Expectation Survey (BES) of the Central Bank showing the overall confidence index (CI) of firms during the period slumped to 30.1 percent—the lowest level of business confidence since the first quarter of 2010.
The confidence index is computed as the percentage of firms optimistic on the local economy minus the percentage of pessimistic firms.
Firms surveyed during the period complained of increasing prices of basic commodities in the global market, augmented by the effects of the implementation of the Tax Reform for Acceleration and Inclusion (TRAIN) law on prices of domestic goods.
Businesses also attributed their weaker sentiment to rising overhead costs and lack of supply of raw materials, as well as seasonal factors such as interruption of business activities and lower crop production during the rainy season, slack in consumer demand as households prioritized enrollment expenses, as well as the suspension of commercial fishing in Davao Gulf from June to August.
Companies also said the weaker peso and stiffer competition during the period augmented their weaker sentiment in the third quarter of the year.
The sentiment of businesses in the Philippines mirrored the less buoyant business outlook in Canada, Chile, Hong Kong, the Netherlands, New Zealand, South Korea and the US; but was in contrast to the more bullish views of those in Australia, Brazil, Denmark, Greece, Hungary and Mexico.
Across sectors, the wholesale and retail trade sector registered the biggest decline in confidence.
The outlook of importers, according to the BSP, was affected largely by lower consumer demand during the rainy season, while businesses involved in exporting activities expressed concerns over the disruption in normal operations, resulting from annual plant overhauling and port congestion issues, as well as reduction in export orders.
The industry firms’ less buoyant outlook for the current quarter stemmed from expectations of lower export orders, lack of raw materials, annual overhauling of machineries, and closure of high seas in the international waters for fishing activities.
Construction firms, on the other hand, were less optimistic due largely to the slowdown in construction activities during the rainy season, as well as increasing costs of components like fuel and spare parts and maintenance of machinery.
For the coming quarter, however, sentiment turned more upbeat with a CI hitting 42.6, as local firms expect uptick in consumer demand during the holiday and harvest seasons, continued increase in orders and projects, expansion of businesses and new product lines, continued rollout of government infrastructure and other development projects, more favorable weather conditions for agricultural products, and opening of high seas and fishing operations in October.