OPTIMISM among firms in the country steadied in the second quarter from the preceding three months — though it dropped from a year ago — in the face of expectations of higher prices of goods and as businesses continued to adjust to a new tax regime, a recent central bank survey showed.
Results of the latest Business Expectations Survey conducted by the Bangko Sentral ng Pilipinas (BSP) showed that 39.3% of companies remained upbeat last quarter, 0.2 points less than the preceding three months though 3.7 points lower than the overall confidence index recorded in the comparable period in 2017.
The reading is the lowest since the 37.9% logged in July-September of last year and marks a decline for the second straight quarter.

Redentor Paolo M. Alegre, Jr., head of the BSP Department of Economic Statistics, said businesses cited sustained demand for their products and services as the reason for their steady outlook, but “ongoing market adjustments” to the Tax Reform for Acceleration and Inclusion (TRAIN) law that took effect as 2018 began remain a pressing concern for companies.
“There was a slight dent on optimism caused by expectations of higher consumer prices — partly due to oil price hikes — and peso depreciation,” Mr. Alegre said in a press briefing yesterday.
Seasonal factors such as a spike in demand in the dry months, enrolment and harvest periods; expansion of businesses and new product lines; sound macroeconomic conditions; and ongoing rollout of state infrastructure projects kept business outlook buoyant.
“I think the only difference between then and now is the implementation of the TRAIN law and the corresponding implications, particularly on prices,” BSP Deputy Governor Diwa C. Guinigundo explained in the same briefing.
“The other positive way of looking at it is, if that is the only reason, in fact that should be positive to business.”
The survey covered 1,466 firms between April 2 to May 22 — drawn from the combined list of the Securities and Exchange Commission’s Top 7,000 Corporations in 2010 and BusinessWorld’s 2016 Top 1,000 Corporations in the Philippines — and compares the number of respondents optimistic about their prospects versus those who were pessimistic. A positive reading means optimists outnumbered pessimists.
Firms based in Metro Manila grew less upbeat during the quarter (37.3% from 41.1% in the first quarter and 43.8% a year ago) as they cited higher utility and fuel costs, as well as stiffer competition. This more than offset the stronger optimism among companies based in the provinces (43% from 36.7% in the first quarter and 41.7% a year ago) on the back of summer, enrolment and fiesta season providing generally “favorable” business conditions.
By type of business, exporters grew more bullish as they expected better prices for their products and increased orders. Importers as well as domestic-oriented firms were also more optimistic as they expected a boost from economic growth and robust consumer demand.
Optimism surged among construction firms as they bagged new projects from the government and private sector, while wholesale and retail traders also expected a lift from “brisker” economic activity.
Meanwhile, firms in the services sector saw optimism dip due to a weaker peso and higher commodity costs.
Companies also said they will proceed with expansion plans, but fewer establishments said they will hire more workers compared to the preceding quarter.
Firms also expect the peso to remain weak, interest rates to keep rising and inflation to pick up further. Financial conditions are also expected to tighten, although credit channels will remain accessible.
Business sentiment turned less buoyant for the third quarter, the central bank said, with the “next quarter” index down to 40.4% from 47.8% previously. The seasonal dip in optimism comes as firms expect interruption of business activities during the rainy season, lower consumer demand as households pour funds into school fees and see even higher commodity prices. — Melissa Luz T. Lopez