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PH business optimism drops

Business optimism in the Philippine economy fell in the first quarter of 2016 from a quarter ago based on overall expectations about selling prices and energy costs, although there was some slight improvement in companies’ revenue and hiring outlooks.

This is the result of a quarterly global business survey of 2,500 businesses in 36 economies from Grant Thornton’s International Business Report (IBR).

According to the survey, firms’ optimism for the Philippine economy in the next 12 months dropped to 56 percent in the first quarter of 2016 from 84 percent in the fourth quarter of 2015.

Business expectations were down in the field of selling prices at 34 percent from 62 percent, and employment at 42 percent from 60 percent.

Firms also noted that rising energy costs are a major constraint to the economy for the year ahead.

Nevertheless, expectations for revenue, exports, profitability, and research and development investment in the Philippines have improved.

Globally, business optimism has dropped to its lowest level in three years with most regions reporting a slump in confidence, the survey said.

Business optimism fell to net 26 percent in the first quarter, the lowest quarterly figure since the fourth quarter of 2012.

The research also found 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 have led to the majority of regions globally reporting a fall in their economic outlook.

“The 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,” Marivic Españo, chairperson and chief executive officer of P&A Grant Thornton said.

“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,” she added.

The negative trend is evident across the globe, including the G7, European Union (EU), North America, and Asia Pacific, it added.

However, the survey said 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 fell from 31 percent in the fourth quarter of 2015 to 21 percent in the first quarter of 2016.

“The message from businesses 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,” Españo.

However, she noted 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,” Españo pointed out.

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

The proportion of firms expecting an increase in revenue over the next twelve months has gone up slightly to 37 percent, the only region to report an increase, it said.

The same is true of employment; while every other region has reported a fall in the first quarter, the proportion of businesses in Asia Pacific planning to hire more people went up from 23 percent to 27 percent.

As published in Manila Times dated 13 April 2016 by Mayvelin U. Caraballo