International Business Report

Biz optimism falls to four-year low

FILIPINO companies' optimism on the economy dropped to a four-year low in the second half of 2019 despite bullish prospects in terms of revenue and profitability.

The Philippines ranked 10th are record low, among the 32 countries surveyed for the Grant Thornton International Business Report (IBR).

Data showed the Philippines posted a 67 net optimism rate, the lowest since the first quarter of 2016 and 17 percentage points lower than the 84 percent recorded in the first half of 2019.

Optimism dropped the past six months even as 57 percent of the companies surveyed have grown their revenue by more than five percent in the last 12 months.

Two-thirds of firms retained an optimistic or very optimistic economic outlook for the Philippines but this is down 17 percentage points from the first half of 2019.

Expectations of the mid-market to grow revenue have slightly decreased from 70 percent in the first half of 2019 to 68 percent in the second half, while profit expectations have decreased from 80 percent to 71 percent.

Revenue and profit expectations both declined -- although more modestly in comparison to the fall in optimism -- and both remain strongly positive at around more than 70 percent.

The IBR said 44 percent of mid-market companies in the Philippines expect their exports to increase even if expectations have actually decreased from 59 percent in the first of 2019 to 44 percent in the second half.

Export intentions declined by 15 percentage points to 44 percent although it remains almost double the 2015 to 2018 average.

However, this is below the Asean average and moving in the opposite direction to the emerging trend in Asia - Pacific.

Investment intentions are mostly down from first half of 2019, although a majority of firms still expect to increase investment expenditure over the next 12 months.

About 68 percent of business surveyed intend to invest in research and development, followed by employment (67 percent), technology (63 percent), plant and machinery (53 percent), and new buildings (53 percent).

"The latest figures are beginning to reveal the global slowdown in economic growth. On a positive note, mid-sized firms in the Philippines remain very much optimistic about their expansion," said Ma. Victoria Españo, chairperson and chief executive officer of P&A Grant Thornton.

Firms are increasingly concerned about a shortage of orders.

When asked to identify the biggest constraints to domestice growth and expansions, 40 percent of Filipino mid-sized firms cited reduced demand for their products and services, up 5 percentage points to 40 percent, the same as the second half of 2018 and the highest in three years.

Around a third of those surveyed view the availability of skilled workers and labor costs as business constraints, lower than global and Asean averages.

about 27 percen of Filipino medium-sized companies surveyed said financial constraints were a barrier to expanding their business internationally, while others also cited rule of law and corruption (26 percent) and tax codes and compliance (25 percent) as barriers.

 

As published in Malaya, dated 15 January 2020