RP business sector losing confidence in economy

MANILA, Philippines- Local businessmen are less optimistic about prospects during the second quarter of the year as the looming United States recession pulls the Philippine economy down, the Bangko Sentral ng Pilipinas said Thursday. In its latest Business Expectations Survey, the central bank said the local business sector's confidence index dropped by 17 index points. The survey measured company executives' expected prospects in the second and third quarter of the year. The BES showed that overall confidence index for the second quarter dropped from 29.9 points in the previous quarter and 46.4 points in the same quarter last year to only 12.6 points this year. BSP deputy governor Diwa Guinigundo admitted the drop was significant but highlighted that, overall, optimism still prevailed in the business sector since the index still remained in the positive end. Guinigundo said the BES results showed that businesses were wary of the risks related to the US recession, volatile and high crude oil prices, rising prices of goods (including food and especially rice) and services (transportation and communication), high input costs, petitions for wage hikes, and local political noise. “The lower index is consistent with the broadly more cautious sentiment of businesses and consumers in many developed economies," Guinigundo said. According to Guinigundo, business executives also expect the peso to weaken further, the inflation rate to go up and interest rates also to go up in the next two quarters. The central bank's study showed that the business outlook for the third quarter of the year was also less optimistic, with the confidence index at 16.6 points which was 24.4 points and 28.1 points down when compared to the levels posted last quarter and last year. Guinigundo said importers were by far the most optimistic sector while importer/exporters were the most grim in their outlook for the next two quarters. According to the BES results, there was also an increasing perception of tighter access to credit in the next two quarters, with the confidence index at its lowest level since 2007. Guinigundo, however, assured that although optimism level is declining, expansion in some businesses particularly construction would still result to a net increase in job creation in the next two quarters. The employment index at 11.4 percent (though lower than that in the last quarter and last year) indicated an anticipated continued hiring of additional employees in the third quarter. The BES showed that the employment outlook continued to be favorable for the construction and services sectors (specifically hotels and restaurants, renting and business activities, transportation and financial intermediation sub-sectors), consistent with their more positive macroeconomic outlook. - GMANews.TV