PH firms turned more upbeat in February
Business confidence rebounded sharply in February, before an energy shock tied to the Middle East conflict rekindled inflation fears, as firms bet on stronger sales and an improving economy after a massive corruption scandal rattled sentiment.
A survey of 502 companies conducted from Feb. 5 to Feb. 28 showed the confidence index rose to 8.2 percent from 0.9 percent in January, the Bangko Sentral ng Pilipinas said. A positive reading means optimists outnumber pessimists.
Companies attributed their improved outlook to expectations of higher income and sales, supported by stronger demand for food, loan products, education, manpower, property development and construction services. Businesses also anticipated better domestic economic conditions, including stronger growth prospects and stable inflation.
Firms expect inflation to average 2.3 percent in February, 2.5 percent in May and 2.7 percent over the next 12 months—well within the central bank’s 2 to 4 percent target range. Consequently, borrowing costs in pesos are seen declining in February and May before rising over the next year.
Governance reforms
The central bank said firms also expected a looser cash position but tighter access to credit. The financial condition index improved to -15.2 percent from -19.2 percent in January, while the credit access index worsened to -4 percent from -0.6 percent.
Investor confidence strengthened as well, survey data showed, buoyed by expectations of higher public infrastructure spending and continued governance reforms after last year’s corruption scandal weighed on growth.
The upbeat sentiment preceded the intensifying conflict in the Middle East, which has heightened concerns over energy prices for oil-importing economies, such as the Philippines, the first country to declare a national energy emergency in response to the crisis.
Amid the uncertainty, the central bank last week held a surprise policy meeting and kept its benchmark interest rate unchanged at 4.25 percent, avoiding a rate increase that could delay the economy’s recovery from the graft fallout even as it now expects inflation to overshoot its target band this year.
Before the upheaval, confidence for the quarter ahead rose to 37.4 percent from 33 percent, while the year-ahead index climbed to 51.1 percent from 38.6 percent.
Hiring plans also improved, with the employment outlook index rising to 27.2 percent from 11.3 percent for the next three months and to 30 percent from 23.3 percent for the year ahead.
