P&A Grant Thornton

Business less optimistic but expects to profit more

Less optimistic Optimism in the Philippines fell in the fourth quarter of 2016, yet local enterprises remained the second most optimistic among 40 countries, the Grant Thornton International Business Report(IBR) said.

The quarterly global survey said the Philippines has been seeing a decline in optimism last year, with 56 percent in the first quarter the lowest in 2016. But optimism surged to 94 percent in the second quarter.

The country, however, registered a sudden drop of 10 percentage points in the third quarter to 84 percent and continued its decline in the fourth quarter with only 80 percent.

At this level, the Philippinesis the second most optimistic country, following India and Indonesia which both scored 88 percent.

The report showed the proportion of firms expecting profitability to increase over the next 12 months has gone up to 34 percent, the highest in almost two years.

Profitability in the Philippines has increased from 58 percent in the third quarter to 72 percent, but employment fell to 54 percent from 64 percent.

Revenue expectations were slightly down to 58 percent from 60 percent the previous quarter.

Business leaders across the Asia Pacific region reported a split in optimism heading into 2017.

The findings from Grant Thornton’s most recent quarterly global survey of 2,600 businesses in 37 economies revealed that emerging and developed Asia Pacific economies are travelling in different directions when it comes to their outlook for the new year.

 “There is a striking split in the direction of travel between business leaders in emerging and developed Asia Pacific countries. Part of the reason for this could be the likely scrapping of the Trans-Pacific Partnership, out of which developed economies – like those of Australia and New Zealand – stood to gain the most,”said MarivicEspaño, chairperson and chief executive officer at P&A Grant Thornton.

“However, China is looking to implement its own regional economic partnership, which could fill some of that gap. The high levels of optimism in emerging economies reflect what can happen when closer economic ties are in place, with the Asean Economic Community agreed in 2015,” added Españo.

 The report said business optimism among developed Asia Pacific economies has fallen eight percentage points in the fourth quarter of 2016 to net -16 percent. Japan, in particular, has fallen eight percentage points to -45 percent.

However, among emerging Asia Pacific economies, the picture is much brighter. Business optimism has increased by 11 percentage points to 53 percent.  

 The research found that globally, majority of business leaders start 2017 in a positive frame of mind with a net 38 percent,an increase of five percentage points from the third quarter and the highest level since the same quarter in 2015.

“Globally, the increase in optimism reflects a view among the business community that uncertainty over the outcome of major events like the EU referendum and the US presidential election is now behind them. Knowing the results will allow businesses to have a clearer steer on key issues such as taxes, jobs and trade policy,” Españo said.

Globally, the proportion of firms expecting revenue to increase in 2017 has gone up by five percentage points to net 50 percent, the highest figure in nearly two years. China (+14 percentage points) and the US (+11 percentage points) reported particularly strong swings in revenue expectations in the fourth quarter.

 However, the IBR also revealed that the picture outside Asia is not entirely positive. 

Business optimism in Mexico has fallen to just eight percent in the fourth quarter – the lowest quarterly figure it has ever recorded. In Russia, optimism has fallen 13 percentage points to -7 percent. 

In addition, the proportion of firms in the EU citing exchange rate fluctuations as a constraint on growth has increased by eight percentage points to 21 percent, as elections in France and Germany have the potential to cause market uncertainty.

 “There will be challenges in 2017, including the impact of further rate rises from the US Federal Reserve.But these shouldn’t mean that growth plans across Asia Pacific should be abandoned. They may be focused on investing for greater efficiency, hiring new skilled workers, or researching new markets and services,” Españo said.

“Dynamic firms with the ability to think long-term and pay attention to their operations will be the big winners,” added Españo. 

 

As published in Malaya, dated 3 January 2017