| Manila Bulletin Feb 17, 2006 Latest BSP survey finds business sector optimistic |
| Business outlook for the first two quarters of 2006 is very optimistic, the first quarter Business Expectations Survey (BES) conducted by the BSP showed. The overall diffusion index (DI) in the current quarter expanded significantly to 23.4 percent from 2.8 percent. The DI increased further to 37.2 percent in the next quarter. The DI is computed as the percentage share of firms that answered in the affirmative less percentage share of firms that answered in the negative in a given indicator. All sectors viewed that business will be better in the first two quarters of 2006, the survey showed. For the current quarter, the services sector was the most upbeat with an index of 31.6 percent, up from 11.3 percent in the previous survey; followed by the industry sector at 29.6 percent from 2.0 percent; construction at 25.3 percent from -11.4 percent; and lastly the trade sector at 8.4 percent from -2.1 percent. Respondents attributed their positive business outlook during the quarter to the following: (1) appreciation of the peso; (2) lower interest rates; (3) improved government fiscal position ; (4) expectations of sales increase during summer, graduation period and school opening in June; (5) higher tourists arrivals; and (6) expected increase in export receipts during the second quarter. The volume of business activity index for the first quarter of 2006 is lower by one percentage point at 16 percent from 17 percent in the previous survey due to the expected slowdown in consumer spending after the Christmas season. . NCR respondents expected an increase in the volume of business activity with its DI improving to 20.2 percent from 17.3 percent in the previous quarter. While volume of business activity DI in AONCR during the first quarter of 2006 remains positive, the index is lower at 8.8 percent compared to 16.2 percent in the fourth quarter of 2006. Both NCR and AONCR DIs show that volume of business is expected to increase further in the next quarter of 2006 with the opening of the school year, harvest season, and increase in tourist arrivals. Although still negative, the outlook of respondent firms in the NCR on indices on credit access and financial conditions improved considerably. The same trends are observed by respondent firms in AONCR. Albeit modestly, the overall capacity utilization in the industry sector is also expected to increase to 75.5 percent for the first quarter of 2006 from 73.5 percent in the previous quarter. Average capacity utilization for NCR firms is expected to rise to 74.7 percent in the current quarter while the average capacity utilization of firms in AONCR would remain unchanged at 76.3 percent. Respondents cited that the biggest risks which could slow down business expansion in the country are the increase in the VAT rate to 12 percent starting February 1, 2006, rise in oil prices, and continuing political noise. Other major risks to business which were ranked highly by the respondents in all sectors were stiffer competition, insufficient demand, unclear economic laws particularly on taxation and financial problems. Survey respondents anticipated a stronger and stable peso, and higher inflation and domestic borrowing rates during the first two quarters of 2006. |
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