Companies even more upbeat

Rose-tinted glasses are again in fashion among businesses which have become even more bullish about the economy, the Bangko Sentral ng Pilipinas (BSP) said Thursday. In a briefing yesterday, central bank officials said the business confidence index for the first quarter had hit 39.1%, the highest in two years, from 22% three months earlier. The index for the second quarter, meanwhile, was at 52.6%, the second highest level since the quarterly Business Expectations Survey (BES) was started in 2001. The scores comprise the difference between the percentage of companies that answer in the affirmative and those offering the opposing view with respect to a given indicator. The nationwide survey, conducted from January 5 to February 12, polled 1,664 firms drawn from the Securities and Exchange Commission’s top 7,000 corporations. The survey response rate for this quarter was 73.%, the BSP said. "Moderate inflation, the steady stream of overseas Filipinos’ remittances, and election-related spending are some of the factors that buoyed respondents’ expectations of higher spending that will spur business activity," BSP Assistant Governor Maria Cyd Tuano-Amador said, reading from a statement. The improvement, she added, mirrors sentiment in Hong Kong, Singapore, Australia, Europe and the United States. "All firms, regardless of the size of operations, reported stronger business confidence indicating that the economic recovery will benefit the business sector as a whole," the BSP said in a statement. Rosabel B. Guerrero, director of the BSP’s department of economic statistics, said the construction and service industries were the most upbeat. "Across sectors sentiment also improved, with construction being the most optimistic because of government spending and real estate expansion," she said. With respect to key economic indicators, Ms. Guerrero said businesses expected interest rates, inflation, and the peso to go up this quarter and the next. "The expected increase in inflation could stem from the possible shortfall in the supply of agricultural products due to El Niño weather conditions and impending power rate adjustments. These factors could be tempered, however, by the expected appreciation of the peso. Expectation of higher inflation could exert upward pressure on other interest rates," she said. Asked how expectations of rising prices would affect monetary policy, Ms. Tuano-Amador said: "This validates our view that inflation, although rising, should remain moderate... "[B]ased on current readings, we think that current monetary settings are ripe for a review so we continue to be flexible on our exit strategy and this is one of the data we are closely watching." -- DGKC, BusinessWorld