P&A Grant Thornton News

Economic optimism for next 12 months declines–IBR

Businesses have better expectations in the Philippines in terms of profitability and exports in the next 12 months, but overall optimism in the economy has declined.

According to the P&A Grant Thornton International Business Report (IBR) in the fourth quarter of 2016 released on Tuesday, the Philippines’s  IBR showed that business outlook for the next 12 months became less optimistic in the fourth quarter of 2016 at 80 percent, which declined from 84 percent in the third quarter and 94 percent in the second quarter, but higher than the first quarter’s 56 percent.

Economic uncertainty in the country also increased to 40 percent in the last quarter’s report, from 38 percent and 24 percent in the third and second quarters, respectively. Economic uncertainty was at its peak this year in the first quarter, at 46 percent.

Expectations on employment and research and development for the next 12 months both dropped by 10 percentage points quarter-on-quarter basis.

Employment outlook fell to 54 percent in the fourth quarter, from 64 percent in its previous quarter, while prospects for research and development weakened to 46 percent, from 56 percent.

Businessmen’s expectations on their revenues, likewise, declined to 58 percent in the last quarter of 2016, from 84 percent in the third quarter, but profitability outlook recovered from 58 percent in the third quarter report to 72 percent in the fourth quarter.

Outlook on exports further improved in the last quarter of 2016 to 30 percent.

At the start of 2016, prospect on exports was only at 18 percent. It went up to 20 percent in the second quarter and increased to 24 percent in the third quarter.

Meanwhile, the IBR showed that business optimism globally increased by five percentage points to net 38 percent.

“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,” P&A Grant Thornton Chairman and CEO Marivic Españo said.

“Knowing the results will allow businesses to have a clearer steer on key issues such as taxes, jobs and trade policy,” she added.

But in Asia-Pacific economies, a split in optimism for the next 12 months was recorded as developed economies registered a decline of eight percentage points in the last quarter of 2016 at net -16 percent, while emerging economies have increased optimism by 11 percentage points to 53 percent.

“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,” Españo noted.

“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,” the executive explained.

The IBR is a quarterly global survey of 2,600 businesses across 37 economies.

 

As published in Business Mirror, dated 4 January 2017