Business sentiment weakens in third quarter: central bank survey

September 6, 2018

The central bank said business outlook for the economy "turned less optimistic" for the third quarter, according to its quarterly survey released Thursday.

The overall confidence index declined to 30.1 percent, the lowest level since the first quarter of 2010. "This means that the number of optimists declined but continued to be greater than the number of pessimists during the quarter," the survey said.

Respondents cited 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, rising overhead costs and lack of supply of raw materials, 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, weakening peso, and  stiffer competition.

"Businesses anticipated inflation to increase, the peso to depreciate, and interest rates to go up for the current and next quarters," the survey said.

Respondents "expected that the rate of increase in commodity prices will breach the upper end of the government's 2 to 4 percent inflation target range for 2018, at 4.7 percent for Q3 2018 and 4.8 percent for Q4 2018."

But for the fourth quarter, outlook turned more upbeat as the index rose to 42.6 percent from 40.4 percent in the previous quarter.

Respondents' more positive outlook for the fourth quarter was due to expectations of:an 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/fishing operations in October. DMS