Philippine business outlook for the fourth quarter has improved following a less optimistic sentiment for the third quarter, according to the latest business confidence survey of the Bangko Sentral ng Pilipinas (BSP).
BSP said business outlook for the fourth quarter is more upbeat as the confidence index (CI) rose to 56.1%, rising from 47.6% in the third quarter of 2019. This is the highest next-quarter CI since the fourth quarter of 2016.
Philippine importers and domestic-oriented firms expect higher domestic demand in the fourth quarter of this year due to the holiday season, stronger inflows of remittances, and more favorable macroeconomic conditions, according to the central bank.
Exporters and dual-activity firms’ outlook, however, is partly weighed down by expectations of lower demand for manufacturing of industrial products (i.e., electronics and semiconductor products).
The central bank said the more positive outlook of businesses for the fourth quarter is due to expectations of higher consumer demand during the holiday and harvest seasons, continued increases in orders and projects, more favorable macroeconomic conditions, higher government spending/infrastructure, and business expansion.
Less positive Q3 sentiment
This follows a less positive sentiment for the third quarter when trading firms were largely affected by seasonal slack in consumer demand.
Overall CI for the third quarter fell to 37.3% from 40.5% in the second quarter. Respondents attributed their weaker sentiment to seasonal factors such as slack in the demand and slowdown of business activities during the rainy season, decline in orders leading to lower sales, lack of supply of raw materials, perceived unfavorable effects of various government policies (i.e., rice tariffication law, banning of provincial buses on EDSA), and stiffer competition.
BSP said that in general, business sentiment for the third quarter was less optimistic across sectors, except for the services sector, which was more upbeat. Aside from the sluggish demand during the rainy season, the foreseen negative effect of rice tarrification law was also among the reasons cited by the respondents for their less buoyant outlook.
Construction firms had the least buoyant outlook among the three sub-sectors for the third quarter due to the uncertainty caused by the US-China trade war and perceived bureaucracy and corruption in the government.
Industry firms’ outlook was also less buoyant, as CIs of firms from mining and quarrying, manufacturing and utilities sub-sectors turned less positive.
Seasonal demand slack
BSP said respondents attributed their less optimistic outlook for the third quarter to the seasonal slack in demand during the rainy season, limited operations due to the repairs of machinery and lack of government support for mining activities.
The less optimistic outlook of the wholesale and retail trade sector for the third quarter was due to seasonal slack in demand during the rainy season, stiffer competition and open rice importation.
Meanwhile, sentiment of firms in the services sector was more upbeat for the third quarter. The more optimistic views emanated from the community and social services, financial intermediaries, real estate and transportation sub-sectors. The views of firms from these sub-sectors stemmed from their expectations of a resumption in government spending, following the delay in the passage of the 2019 national budget.
