(Philstar)
Still bullish for 2007
BUSINESS & LEISURE By Ray Butch Gamboa
Saturday, September 22, 2007
Yes, the business sector is still bullish for the rest of the year. The Bangko Sentral ng Pilipinas (BSP) continues to be a dynamic force in having the country forge ahead. BSP head Amando Tetangco and Deputy Governor Diwa Ginigundo tirelessly monitor all economic indicators affecting the country and their effects on the business sector.
In their most recent survey, where they screened third quarter results, they surveyed 1,063 firms.. They based their survey on the top 5000 corporations as cited by the Securities and Exchange Commission. Of this, 477 firms were within the National Capital Region while 1,586 were outside the NCR. The response from this representative sector was encouraging indeed.
Based on the survey, the business sector had an overall confidence in the economy. The confidence index on the outlook on Philippine economy was an amazing 40 percent, and as BSP officials claim, we’ve never had it this high.
Importers and exporters were likewise surveyed, and importers’ confidence index for 3rd quarter was at 47.5 percent. They are still bullish for the 4th quarter, with the confidence index reaching 59.6 percent. The same, though, cannot be said of exporters. For the third quarter, their confidence index was at an all-time low of 4.2 percent, though the exporters seem to be willing to give the turn of events for them the benefit of the doubt with a slightly higher rating of 6.3 percent for the 4th quarter.
A two percent improvement in their outlook for the fourth quarter of 2007 is optimistic indeed, but the tales of woe of the exporters continue relentlessly. As the Peso closed at its one-month high, due largely to the Federal Reserve slash of their rates (which was more than market analysts expected), this further aggravates an already dismal business environment for them. Investors appreciate the Bangko Sentral’s prompt reaction to the cut in interest rates. While this had a positive result on others (like the stock market for example whose index rose immediately on the strength of this announcement alone), the exporters are still at a loss. With regards to the bourses’ elated response to the development with the US Fed cut, they are still treading a bit more cautiously after that initial reaction in the wake of the very serious implications of the recent political developments rocking the country. This could very well reverse the positive gains we are enjoying, and market analysts not only here but in neighboring Asian countries are monitoring this very closely.
As the Peso gained another 56 centavos, we inch nearer to the forecast we made earlier (around the middle of the year) that the Peso would likely close at P45.50 by year end based on the strong dollar remittances from our super heroes, the OFWs, and of course the balance of payment surplus that we have been enjoying.
Asked how they felt about the performance of the Philippine peso, the respondents felt that the peso performed very well in the second quarter, and would be strong and stable for Q3 and Q4, They rated the inflation rate low in Q2 and Q3 but predicted this to be higher in the fourth quarter. The same goes for the peso borrowing rate.
There are several factors to be considered here. For one, the effects of the VAT could slowly be dissipating. The country reeled from this early last year, and it is only now that we are adjusting and recovering. The lower interest rates could also be a positive factor, and for agricultural products, the effects of El Nino are now slowly dissipating as well. The agricultural sector is slowly getting back to its feet as the farms get irrigated.
The apprehensions for the fourth quarter, on the other hand, are due mainly to the following factors: a) competition b) insufficient demand c) financial problems.
Even the medium and large firms were optimistic for Q3 and Q4. Large firms (those employing 500 or more) had a confidence index of 39.5 percent for the third quarter and a very optimistic 55.1 percent for the 4th quarter, while the medium firms (those with 100 to 500 employees) registered an index of 42.2 percent for Q3 and a slightly better 48.8 percent for Q4. The smaller firms (employing less than 100) registered an index of 33.6 percent for Q3, though this jumped dramatically to 53.8 percent for the 4th quarter.
The BSP reports that even the sectoral outlook shares this general optimism. Their survey included the construction sector and the services sector as well. Of this, the financial sector registered the highest level of confidence. The positive view of the respondents in this latest survey is due to the following factors:
1. A generally stable macroeconomic environment
2.Increased remittances from overseas Filipino workers
3. Solid performance of the Asian countries
4. The coming holiday season
5. New and enhance business strategies
Even as the business conditions continue to improve, access to credit has likewise improved. The BSP slashed its own discount rates in reaction to the US Federal Reserve cuts rate by a half point. This is the interest the BSP charges the local banks for direct loans. There could be further reduction in local interest rates that we could look forward to with this development, although the BSP is cautious about announcing more definitive terms.
With the optimistic overall business outlook on the local economy, it is only natural that employment expectations for the third and fourth quarter are very high. New grads are now finding it easier to find jobs than, say, five years ago. With the opening of more business outsource centers, more and more job opportunities await our countrymen. As long as we can keep those foreign investments pouring in, the prospects look good.
Mabuhay!!! Be proud to be a Filipino.
For comments: (e-mail) businessleisure-star@stv.com.ph
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wow. very bullish. Then again it’s all perceptions. With all our political dramas, a slight mishap can be really damaging.
The poor will argue these are all bull indeed since there is no economic trickle down effect to them. It just stays at the top.
Peso appreciation? Our exports suffer. and close down.
OFW remittances? Yup, our best talents are going abroad. We probably have to import people at one point just so we have the necessary occupations we need.
GDP growth? It’s all government statistics. I don’t even know how they calculate their numbers. Hence I take them with a grain of salt. 7.5% recently….Wow. seriously? Also, relative to other rising asian economies like vietnam, it’s rather pitiful compared to them.
More BPOs and Call centers? I read somewhere there is now a deficiency in quality graduates speaking good english…. This spells trouble i think. Aside from this, what area of employment are we good at? Oh wait, they’re all going abroad pala.
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