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Business confidence dips to 7-year low

02/27/2009

Business sentiment in the last quarter of last year fell to its lowest since 2002, the latest confidence survey conducted by the Bangko Sentral ng Pilipinas (BSP) showed.

The survey showed the overall confidence index (CI) moved further down into negative territory at -23.9 percent, the lowest since 2002.

The overall business outlook was weighed down by concerns over recessionary conditions in many advanced countries, which muted the favorable impact of lower oil and non-oil commodity prices.

For the next quarter, business sentiment continued to be cautious as the number of pessimists again outnumbered the optimists with the CI at -6.5 percent.

Most respondents anticipated that with the global financial turmoil, economic activity both globally and domestically would be weaker.

Concerns about a slowdown in demand from abroad were heightened by the recent release of official Philippine trade statistics which showed exports in December 2008 contracting year-on-year by 40.4 percent.

Other factors cited by respondents as affecting adversely their outlook were the increase in the costs of raw materials, delays in credit collection, and political noise.

Respondents involved in international commodity trading (i.e., importers, exporters and those engaged in dual activities) were generally pessimistic in 2009.

Firms that were engaged in dual activities were the least pessimistic followed closely by importers. Exporters registered the lowest CI.

The same trend was observed for second quarter of 2009. Exporters’ sentiment reflected broadly their worries that the global slowdown would significantly dampen consumer demand in the next months.

A breakdown of responses by firm size indicated that large-sized firms were less confident about the business outlook in 2009 compared to small- and medium-sized firms.

Small-sized firms turned more optimistic in 2009 as they cater mostly to the domestic market and are less exposed to the vagaries and downturns of global markets relative to large-sized establish-ments.