2 weeks Ago By Katlene O. Cacho
BUSINESSES are more optimistic for the fourth quarter, according to the latest Business Expectations Survey (BES) conducted by the Bangko Sentral ng Pilipinas (BSP). The BSP reported that the country’s business confidence turned bullish as the overall confidence index (CI) improved to 56.8 percent from 43.
7 percent in the second quarter of 2024. The more optimistic outlook for the fourth quarter was attributed to expectations of higher demand for products and services during the holiday season, lower interest rates, easing inflation, and improving economic conditions. Similarly, the business outlook for the next 12 months was more positive, with the overall CI rising to 58 percent from 56.
5 percent in the second quarter. This optimism was driven by expectations of sustained strong demand, business expansions, lower inflation, and the introduction of new and improved products and services. The third-quarter 2024 BES was conducted from July 5 to Aug.
27, 2024, covering 1,525 firms nationwide. Results of the survey showed that businesses across regions were more optimistic for the fourth quarter, expecting higher demand for goods and services during the holiday season, lower interest rates and easing inflation. However, businesses in Bicol were less optimistic, while those in Eastern Visayas remained upbeat.
Business sentiment improved across all sectors except for the construction sector, where confidence was less buoyant. The industry, wholesale and retail trade, and services sectors displayed stronger optimism, primarily due to expectations of robust demand during the holiday season, along with lower interest rates and easing inflation. In contrast, firms in the construction sector cited a lack of new clients and fewer projects as reasons for their less positive outlook for the fourth quarter.
In terms of employment and expansion plans, businesses indicated intentions to hire more workers, and firms in the industry sector may expand their product lines or production capacity in the fourth quarter. The employment outlook index for the fourth quarter and the next 12 months increased to 21.1 percent and 33.
7 percent, respectively, up from 19.2 percent and 29.5 percent in the second-quarter survey results.
Meanwhile, the percentage of businesses in the industry sector with expansion plans for the fourth quarter rose to 22.8 percent (from 20.9 percent) but declined for the next 12 months to 24.
2 percent (from 27.2 percent). The rise in the overall percentage of firms with expansion plans for the fourth quarter was driven by increases in the manufacturing and electricity, gas, and water sub-sectors, which outweighed declines in the mining and quarrying, and agriculture, fishery, and forestry sub-sectors.
Conversely, the decline in expansion plans for the next 12 months stemmed from decreases in the manufacturing, electricity, gas, water and agriculture, fishery, and forestry sub-sectors, which outweighed growth in the mining and quarrying sub-sector. Firms also expect the peso to appreciate in the fourth quarter and the next 12 months. However, they anticipate borrowing rates may rise in the second half of 2024 and the next 12 months.
Additionally, businesses forecast the peso-dollar exchange rate to average P57.93/US$1 in the fourth quarter and P57.94/US$1 in the next 12 months.
Firms are also anticipating a rise in inflation in the second half of 2024 and the next 12 months. Their expectation of higher inflation for the fourth quarter is linked to increased costs of raw materials, seasonal price hikes during the holiday season, rising fuel prices and wage increases. The forecast for higher inflation in the next 12 months is attributed to increased consumer spending during the midterm elections and a weaker peso.
Firms expect inflation to average 4.4 percent in both the fourth quarter and the next 12 months, exceeding the National Government’s target range of 2 to 4 percent for 2024-2025. / KOC.
