P&A Grant Thornton News

PH business optimism wanes in Q4

Down at 80% from 84% in Q3
Business optimism about the Philippines overall lost some steam in the fourth quarter of 2016 from three months earlier, based on expectations for companies’ revenues, hiring, and research and development plans, even as expectations for profitability, exports and the economic outlook improved.

Such were the findings of the quarterly global business survey, which involved 2,600 respondent businesses from 37 economies, including the Philippines, the result of which were contained in Grant Thornton’s International Business Report (IBR).

According to the survey, overall optimism among the respondent companies about the Philippines in the next 12 months dropped to 80 percent in the fourth quarter of 2016 from 84 percent in the third quarter.

Business expectations were down in the area of revenue, at 58 percent from 60 percent, employment at 54 percent from 64 percent, and research and development plans for 2017 at 46 percent from 56 percent.

However, expectations for exports, profitability and the economic prospects have improved to 30 percent, 72 percent and 40 percent, respectively.

Emerging AsiaPac markets prospects brighter
The survey showed that business leaders across the Asia Pacific were divided in their business views heading into 2017, while globally, the majority of business leaders were starting the year off with a positive frame of mind.

The findings reveal that business optimism among developed economies fell 8 percentage points in the fourth quarter to a net negative 16 percent.

“Japan, in particular, has fallen 8 pp to -45 percent. However, among emerging Asia Pacific economies, the picture is much brighter. Business optimism has increased by 11 percentage points to 53 percent,” it said.

Marivic Españo, chairperson and chief executive officer at P&A Grant Thornton, said there is a striking split in the direction of plans 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 (TPP), out of which, developed economies—like those of Australia and New Zealand–stood to gain the most. However, China is looking to implement its own regional economic partnership, which could fill some of that gap,” she explained.

Españo said the high levels of optimism in emerging economies reflect what can happen when closer economic ties are in place, such as the Association of Southeast Asian Nations Economic Community that was agreed in 2015.

Global optimism up 5pp at 38%
Globally, business optimism at the end of the fourth quarter of 2016 stands at net 38 percent, an increase of 5 percentage points from the third quarter and the highest level since the third quarter of 2015.

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

Españo expects challenges in 2017 will include the impact of further interest rate increases from the US Federal Reserve. She cautioned, however, that these should not mean that growth plans across the Asia Pacific should be abandoned.

“They may be focused on investing for greater efficiency, hiring new skilled workers, or researching new markets and services. Dynamic firms with the ability to think long-term and pay attention to their operations will be the big winners,” she added.


As published in The Manila Times, dated 4 January 2017