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PHL business sentiment improves, but ECQ may dampen outlook

Mall stores have seen lower sales as many consumers stay home amid the health crisis.

PHILIPPINE FIRMS are more optimistic for the rest of the year, a central bank survey showed, but the surge in coronavirus infections and the reimposition of a strict lockdown in the capital region threatens to dampen sentiment.

The overall business confidence index in the first three months of the year improved to 17.4% from a reading of 10.6% in the fourth quarter of 2020, based on the Business Expectation Survey results released by the Bangko Sentral ng Pilipinas (BSP) on Thursday.

This is the highest reading since the 22.3% in the first quarter of 2020 before the pandemic’s impact became more pronounced.

Business Expectations Survey

The confidence index reading for business outlook for the second quarter also improved to 42.8% from 37.4%.

Business optimism spilled over for the rest of the year with the confidence index at 60.5%, better than the 57.7% the previous quarter and the highest since the 59.6% seen in the fourth quarter of 2019.

The improvement in business confidence could be traced to the easing of restriction measures and re-opening of businesses, as well as more people adapting to the new normal, BSP Department of Economic Statistics Senior Director Redentor Paolo M. Alegre, Jr. said in an online briefing on Thursday.

Respondents also cited the increase in volume of sales and orders, the rollout of the coronavirus disease 2019 (COVID-19) vaccines, and the development of new business strategies, as factors that contributed to business optimism.

“However…as seen from the chart there was a dip in optimism that you see by area or by period basis that with a lockdown, there can be an impact on business sentiment in the second quarter,” Mr. Alegre said.

The study was conducted among 1,512 firms around the country from Feb. 4 to March 12. Metro Manila and nearby provinces was placed under the strictest form of lockdown on March 29. The enhanced community quarantine was extended until April 11.

“So far what we have experienced is just two weeks of ECQ, it depends on the extent where restrictions are reimposed and it also depends on the direction,” BSP Deputy Governor Francisco G. Dakila, Jr. said.

He noted the vaccination rollout also contributed to the firms’ more upbeat outlook.

The BSP study also showed more firms are eyeing to expand in the next quarter (20.6% for the second quarter from 16.9% in the fourth quarter of 2020) although slightly lower for the next 12 months (27% from 28%).

Firms involved in mining, quarrying and manufacturing are planning to expand, while those in agriculture, fishery and forestry sectors were less keen on expansion in the next 12 months.

Firms cited insufficient demand resulting in low sales volume (46.7%) and stiff competition (41.6%) as major risks to their business. — Luz Wendy T. Noble

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