Business sentiment more upbeat in Q1

BSP survey conducted before ECQ imposition show optimism

Business confidence towards the Philippine economy improved in the first quarter of the year as respondents pointed out positive developments during the period.

This is according to the results of the latest Business Expectations Survey (BES) of the Bangko Sentral ng Pilipinas (BSP) released during an online briefing on Thursday.

Redentor Paolo Alegre Jr., BSP Department of Economic Statistics senior director, reported that the January-March confidence index (CI) — computed as the percentage of companies that answered in the affirmative minus those who replied otherwise — rose to 17.4 percent, from the 10.6 percent recorded in the fourth quarter of last year.

“For the first quarter BES, the expectations of business owners are very optimistic. And in relation to our analysis, the current quarter BES result is a good coincident indicator for the first quarter GDP (gross domestic product) results. The correlation is around 0.5 percent with a level of significance of 1 percent,” he stressed.

Business owners are also optimistic when asked for their outlook for the second quarter of the year as the CI picked up to 42.8 percent from 37.4 percent.

Alegre said the respondents’ upbeat sentiment for the first two quarters of 2021 was attributed to the easing of quarantine restrictions and reopening of businesses, and observation that people are adapting to the “new normal.”

They also traced their confidence to the increase in volume of sales and orders; to the rollout of vaccine for the coronavirus disease 2019 (Covid-19); and to the development of new business/marketing strategies.

Respondents also cited expectations of higher demand for electricity and construction activities during summer for their more buoyant views for the second quarter.

Alegre added for the year ahead, firms are also bullish on the country’s economy, with the CI climbing to 60.5 percent from 57.7 percent.

“Looking at the optimism by area, kindly note that for the nationwide, the National Capital Region (NCR), and areas outside the NCR, and for all periods that is; current quarter, next quarter, and the next 12 months, optimism generally rose,” he continued.

The poll, which surveyed 1,512 companies nationwide, was conducted from February 4 to March 12 this year.

“It does not cover the ECQ (enhanced community quarantine) implemented last March 29,” Alegre, however, emphasized.

In a bid to curb rising Covid-19 cases the government reimposed the stricter ECQ — started on March 29 and expected to be concluded on April 11 — in the National Capital Region and adjacent provinces or NCR Plus.

Asked if the ongoing ECQ will have a negative impact on business confidence going forward, central bank officials said the lockdown is not the only factor that affects the firms’ sentiment on the Philippine economy.

Iluminada Sicat, senior assistant governor for BSP’s Monetary Policy Sub-Sector, said other factors that could lift confidence include the Covid-19 vaccine rollout; good developments in terms of global and domestic economic activities; and opening up of overseas Filipino workers’ host countries.

“The ECQ now is quite different from what you’ve seen in the initial stage of the pandemic last year. So far, what we have experienced is just two weeks of the ECQ. So, it depends on the extent where restrictions are reimposed, and it also depends on the direction,” BSP Deputy Governor Francisco Dakila Jr., for his part, noted.