International Business Report

Business optimism in Philippine among top 10 globally

Despite huge drop in 2nd semester

MANILA, Philippines — Business optimism in the Philippines dropped 17 percentage points in the second half of last year, but the country remains one of the 10 most optimistic worldwide, according to a report by Grant Thornton.

Grant Thornton’s International Business Report, which surveyed 105 mid-sized Philippine companies, showed the level of optimism in the economy declined to 67 percent in the second half of last year compared to 84 percent in the first half.

The drop was attributed to lower revenue and profit expectations, export slowdown and reduced investment and employment outlook. 

This low level of optimism was last seen in the first quarter of 2016. 

Despite the drop in business optimism, the Philippines was remained among the 10 most optimistic economies covered by the report.

Apart from the Philippines, other economies with the highest optimism from businesses are Vietnam (82 percent), Indonesia (78 percent) United

Arab Emirates (77 percent), China (74 percent), US (73 percent), Brazil (69 percent), India (69 percent), Greece (68 percent) and Mexico (67 percent).

Based on revenue and profitability outlook, the report showed a decline in the percentage of Philippine firms expecting growth over the next 12 months. 

In particular, 68 percent expect their revenue to increase, down slightly from 70 percent in the first half a year earlier.

Meanwhile, 71 percent see their profitability growing over the next 12 months, lower than 80 percent in the first half last year. 

Of the surveyed firms, 57 percent registered more than five percent increase in revenue in the last 12 months.

The survey also showed 44 percent of the mid-market companies in the Philippines expect their exports to increase, lower than the 59 percent in the first half last year. 

In terms of investment intentions, 53 percent intend to invest in new buildings, down from 59 percent in the first half last year, while 59 percent plan to spend for plant and machinery, lower than 68 percent in the first half a year ago. 

The survey showed 68 percent of Philippine businesses want to invest in research and development, up from 66 percent in the first half last year, while 67 percent expect to increase employment, lower than the 70 percent in the first half a year ago. 

While firms are still looking to expand and invest, concerns remain on shortage of orders. 

When asked about the biggest constraints to domestic growth and expansion, 40 percent of Filipino mid-sized firms cited reduced demand for their products and service.

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

Commenting on the survey results, P&A Grant Thornton chairperson and chief executive officer Ma. Victoria Españo said the latest figures show the global slowdown in economic growth. 

“On a positive note, mid-sized firms in the Philippines remain very much optimistic about their expansion,” she said.

 

As published in The Philippine Star, dated 15 January 2020