Global survey shows Ph business optimism drops for Q1

MANILA, Philippines – New research from Grant Thornton’s International Business Report (IBR), a quarterly global business survey of 2,500 businesses in 36 economies, finds business optimism in the Philippines has fallen in the first quarter of 2016. Globally, business optimism has dropped to its lowest level in three years with most regions reporting a slump in confidence. However, across other measures including revenue and exports, Asia Pacific businesses are bucking the trend and reporting increased expectations for the next few months.

The IBR finds that among businesses in Asia Pacific, business optimism has fallen from 31% in Q4 2015 to 21% in Q1 2016. In the Philippines, optimism fell from 84% to 56% while China dropped 9 points, from 36% to 27% and the same is true in Malaysia (-14% to -24%). However, optimism has increased among businesses in Thailand (4% to 12%) and Indonesia (56% to 57%).

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.

                                                        ESPAÑO

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, 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.”

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%.

Globally, business optimism fell to net 26% in Q1, the lowest quarterly figure since Q4 2012. The trend is evident across the globe, including the G7 (down 7 percentage points in Q1), EU (down 4pp), North America (down 6pp) and Asia Pacific (down 10pp).

Españo added:

“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.

“However, 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.”

As published in Mindanao Times dated 19 April 2016