Aquino, OFW money drive investor confidence

Investor confidence in the Philippines reached an all-time high this quarter, driven by perception that the Aquino administration would be able to sustain a strong economy on increasing remittances by Filipinos abroad. The confidence index hit an all-time high of 50.6 percent this fourth quarter from 45 percent in the third quarter, BSP Economic Statistics director Rosabel Guerrero said in a briefing Thursday, citing results of central bank’s quarterly Business Expectations Survey. The confidence index in the fourth quarter was the highest since the survey was established in 2001. The economy has improved on domestic demand that continues to feed on remittances of overseas Filipinos and higher capital flows to the Philippines, Guerrero said. Money transfers by Filipinos abroad rose by 7.8 percent to $13.782 billion in January-September from $12.789 billion a year earlier, central bank data showed. However, net foreign portfolio investment or hot money grew by 587 percent to $2.5 billion in January-October from $358 million in the same 2009 period. The strong vote of confidence for the Aquino administration has definitely boosted the business sentiment in favor of the Philippines, Guerrero said. Macro fundamentals The confidence index is measured as the percentage of firms that answered in the affirmative, minus the percentage of firms that answered in the negative. Business sentiment has been growing on the positive side since it registered at 18.4 percent in the third quarter of 2009. Guerrero said the improved overall outlook is consistent with the solid macroeconomic environment now prevailing in the country. She cited the strong peso, moderate inflation, rising equity index, and narrower credit spreads. Still, those dealing in foreign trade — importers and exporters — have a less favorable outlook. “The strengthening of the peso also contributed to the lower confidence of respondents in the exports business, but the same factor provided support to the more sanguine outlook of importers given that a strong peso reduces the cost of imports in peso terms," Guerrero said. The survey was conducted from Oct. 1-Nov. 9, with a sampling of 1,624 firms nationwide. — VS, GMANews.TV