Businesses more optimistic in 2023 – BSP

By Lee C. Chipongian | Manila Bulletin
March 30, 2023

Amid elevated inflation and global issues that impact economies, local businessmen are still optimistic and hopeful that pandemic-related normalcy and robust domestic consumer demand will translate to increased profits for the entire year.

The Bangko Sentral ng Pilipinas (BSP), in its latest Business Expectations Survey (BES) for the first quarter 2023, said Filipino companies have a higher confidence indices (CIs) for the first two quarters and the next 12 months compared to the previous BES review which was the last quarter of 2022.

In a press briefing, BSP OIC Senior Director Redentor Paolo M. Alegre for the Monetary Policy Sub-Sector, said on Thursday, March 30, that surveyed firms are more confident in the first six months of the year due to expectations of higher consumer demand for products and services, among other things.

The upbeat outlook is also due to the following: full reopening of the economy and return to pre-pandemic normalcy as more Covid-19 restrictions are lifted; increased business activities and sustained economic recovery; and expansion and new business opportunities in healthcare, manufacturing, and construction sub-sectors.

The optimistic business sentiment led to an overall CI rising sharply to 34 percent from 23.9 percent in the fourth quarter 2022 BES. This means that the percentage of optimists increased and outweighed the percentage of pessimists during the quarter.

The survey likewise identified challenges to businesses during the first quarter. Among the major business risks during the first quarter are: stiff domestic competition; insufficient demand; and high interest rate. Meanwhile, Covid-19 concerns have continued to subside.

Alegre, head of the BSP Department of Statistics, said for the covered period including the next 12 months, businesses expect that the peso-US dollar exchange rate will continue to be stable with a stronger peso but they also see higher borrowing and inflation rates.

The BES indicated that businesses expect an average inflation rate of seven percent for the first quarter, 6.9 percent for the second quarter and 6.6 percent for the next 12 months. In February, the inflation rate stood at 8.6 percent from January’s 8.7 percent.

As for the exchange rate, businesses anticipate a peso average of P55.4 until June this year, and P55.3 for the next 12 months. The spot market opened stronger on Thursday at P54.39 from its last close of P54.45.

Despite their expectations for inflation and the exchange rate, firms expect financial condition and access to credit “to be less tight” during the current survey.

Alegre said the business sentiment across all sectors such as industry, construction, services and wholesale and retail trade sectors all have higher CIs in the first quarter which “suggests a more optimistic business outlook for the current quarter.”

Meanwhile, business outlook across all types of trading firms is generally more upbeat. The different types of trading firms such as exporter, importer, dual-activity and domestic-oriented have positive business sentiments.

In terms of capacity utilization in the first quarter survey, this showed an average level in the industry and construction sectors.

As for the employment outlook index, this declined to 13.4 percent from 21.2 percent in the last results. The BSP said this suggests that hiring intentions may turn less favorable for the next quarter but employment prospects for the next
12 months are expected to improve.

The latest BES was conducted on January 13 to March 6, and surveyed 1,554 firms nationwide, of which 582 companies are in the National Capital Region (NCR) and 972 firms in areas outside of the NCR with 16 regions.

By size of employment, about 44.7 percent of surveyed firms were small-sized firms, while 33.3 percent were medium-sized, and 12.8 percent were large firms.