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Confidence among Philippine businesses for the final quarter of this year is set to climb to a record-high as expectations improved across all sectors following smooth transition of power after the general elections and a steady growth in overseas remittances.
The overall confidence index for the fourth quarter jumped to 59.2 percent, the highest on record, while the third quarter saw confidence rising to 45 percent from 43.9 percent in the second quarter, a survey by the central bank showed Thursday.
Survey respondents attributed the increase in confidence to the steady growth of overseas Filipino remittances, smooth transition of power and favorable expectations on the new government that could boost investor confidence in the economy. Better performance of exports and sustained investment inflows along with government spending on infrastructure also boosted morale of the enterprises, the survey found.
Favorable business sentiment prevailed across all sectors during the third quarter. The business sentiment among industrial firms was more buoyant, while optimism among services, construction and trade sectors was steady or slightly tempered relative to the second quarter, due partially to the usual cyclical downtrend.
There was a considerable improvement in firms' credit accessibility compared to the previous quarter. Furthermore, prospects of employment in the next quarter remained bright as the employment outlook index posted a record high rate of 24 percent, the survey pointed out.
Among the surveyed companies, more firms than in this quarter reported that they planned to expand their businesses in the fourth quarter. Indeed, the overall bright prospects for the businesses have risks associated with it. Respondents listed competition, weak demand and financial problems as key challenges to business activity in the third quarter.
Firms expected inflation and interest rates to go up and the peso to appreciate in the third quarter as well as in the first quarter, according to the survey. However, fewer respondents anticipate inflation to rise and the peso to appreciate during the current quarter compared to the previous survey. At the same time, more respondents expect interest rates to increase during this quarter relative to the last quarter.
The Philippine economy expanded 7.3% year-on-year in the first quarter from 0.5% in the same quarter of 2009. The economy recovered robustly on the election related stimuli and the unbridled increase in the income of overseas Filipinos.
The World Bank expects the economy to grow 4.4% this year, owing to a strong rebound in global trade and the government's developmental policies. Meanwhile, the International Monetary Fund has raised its 2011 growth forecast for the economy.
According to the IMF, the economy is likely to grow 4.5% next year, faster than the 4% growth estimated initially. The economy is seen growing 6% this year.
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