IBR

Business optimism in PH falls in Q1

image: http://www.mb.com.ph/wp-content/uploads/2013/10/bldgcensus.jpg

Makati Central Business District

                                         Makati Central Business District

Business optimism in the Philippines fell 28 percentage points in the first quarter this year as global business confidence plunged to its lowest in three years, an international survey showed.

Grant Thornton’s International Business Report (IBR), a quarterly global business survey measures business confidence of 2,500 businesses in 36 economies, showed that optimism in the Philippines plunged 28 notches to 56 percent from 84 percent in the fourth quarter of 2015.

Globally, business optimism also dropped to its lowest level in three years from 36 percent to 26 percent, the lowest quarterly figure since Q4 2012.  The trend is evident across the globe, including the G7 (down 7 pp in Q1), EU (down 4 pp), North America (down 6 pp) and Asia Pacific (down 10 pp).

The IBR survey also finds Asia Pacific business optimism falling from 31% in Q4 2015 to 21% in Q1 2016.

Business confidence in North America also declined to 40 percent from 46 percent the previous quarter as optimism in the US dropped to 46 from 50 while developed APAC economies plunged to -15 from +4 percent.

China dropped 9 points, from 36% to 27% and the same is true in Malaysia (-14% to -24%).  In ASEAN, optimism also fell from 30 percent to 26 percent.

However, optimism has increased among businesses in Thailand (4% to 12%) and Indonesia (56% to 57%).

Among the 16 major industries surveyed, only four posted positive confidence rating.  These are mining and quarrying, oil and gas and water supply, healthcare and transport.

Education and social services posted the biggest decline from 49 to 5 percent only. Industries with the lowest scores include manufacturing, agriculture, professional services, consumer products, and travel and tourism.

The research also finds that a potent combination of fragile financial markets, volatility in oil prices, concerns over terrorist attacks and political uncertainty including the prospect of the UK leaving the EU and the US Presidential race has led to the majority of regions globally reporting a fall in their economic outlook.

However, expectations for revenue, exports and R&D investment in the Philippines have improved despite decrease in most regions.

The survey, however, also showed that across other measures including revenue and exports, Asia Pacific businesses are bucking the trend and reporting increased expectations for the next few months.

image: http://www.mb.com.ph/wp-content/uploads/2016/04/Marivic-Espano-300x292.jpg

Marivic Espano,  Chairperson and CEO of P&A Grant Thornton

Marivic Espano,  Chairperson and CEO of P&A Grant Thornton

 

Marivic Españo, Chairperson and CEO of P&A Grant Thornton, said:

“The message from business across Asia Pacific is that their outlook for the economy has weakened in the last three months. A range of external factors will have played their role, not least the volatility we saw in financial markets in the first quarter which will have knocked sentiment.

However, Espano also stressed that when businesses look internally at their own operations, the outlook is much brighter.

“Despite the wider uncertainty, many surveyed firms in the Philippines are confident about their prospects for revenue and employment plans. Much of the sentiment across the region is linked to activity in China and while growth there is still expected to cool, there is a broad feeling that the pace and the extent of the Chinese economic slowdown has not been as bad as feared,” she said.

Aside from optimism, expectations around other business measures in Asia Pacific actually provide some welcome relief against a gloomy global backdrop.

The proportion of firms expecting an increase in revenue over the next twelve months has gone up slightly to 37%: the only region to report an increase. The same is true of employment; while every other region has reported a fall in Q1, the proportion of businesses in Asia Pacific planning to hire more people went up from 23% to 27%.

“G20 finance ministers meeting this week will be extra cautious when considering measures to jumpstart the economy, given the whirlwind conditions dragging down business and market sentiment,” she added.

However, she said, there is a risk we could talk ourselves into a global downturn when in fact, moments like this present longer-term opportunities. The most dynamic and successful firms don’t let the noise from external factors out of their control distract them from looking at their own operations, and they continue to invest in the pursuit of growth years down the line.

“Without investment now, businesses will find themselves behind the curve when conditions overhead improve,” she said.

As published in Manila Bulletin dated 14 April 2016 by Bernie Magkilat