(Update) Poll: RP firms expect difficult first half in 2009

ABS-CBN News

Posted at Feb 26 2009 07:45 PM | Updated as of Mar 03 2009 07:05 PM

Businesses in the Philippines see a difficult first half of 2009 with tight credit and weak demand, according to a Bangko Sentral ng Pilipinas survey published Thursday.

Called the confidence index, the BSP's quarterly poll showed that overall business sentiment stood at its lowest level for 7 years. the BSP said in a statement. The index for the first quarter moved further down to -23.9, the lowest since 2002. The index for the second quarter stood at -6.5 percent.

"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," it added.

The bank said export sector concerns were heightened by a 40.4 percent plunge in exports in December, rising raw material costs, "delays in credit collection, and political noise."

The poll found capacity use would fall to 71.5 percent in the first three months of the calendar year, with businesses expecting "tighter access to credit."

"More firms are not planning to hire new workers" in the three months to June, and just 17.8 percent plan to expand operations in the quarter.

The January 5-February 11 poll surveyed 1,410 firms among the top 7,000 corporations across the country, it said.

The government expects to keep the economy growing by up to 4.4 percent this year mainly through increased government spending on infrastructure projects as well as cash handouts to the poor.

Regions

Respondents from the National Capital Region and areas outside have bleaker outlook in the first six months of the year, with the indices landing in negative territory. Firms from the Ilocos, Central Luzon, Soccsksargen regions, however, expect a more upbeat second quarter.

Those from the Davao region are bullish for the first six months as most of the industries in this region are food-related, such as pineapple and banana, the demand for which were expected to continue to perform well in 2009 following expected sustained demand for these essential food items and favorable prices in the global market.

Exporters registered the lowest confidence index, reflecting worries that the global slowdown would significantly dampen consumer demand in the next months.

Large-sized firms were less confident about the business outlook in Q1 and Q2 2009 compared to small- and medium-sized firms. Small-sized firms turned more optimistic in Q2 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 establishments.

Sectors

Bearish outlook is noted across all sectors

The construction sector, however, remained upbeat for the first half, although the indices were lower when compared to the same periods last year. These mirror concerns that the construction of some high-rise condominiums and other projects could slow down in the wake of the global financial crisis.

The industry sector was the most pessimistic in the first quarter, with the index pluning to -30.1 percent due to weak customer demand as reports of lay-offs and lower disposable income amidst a fragile economic environment.

The wholesale and retail trade, and the services sectors, plunged to -22.8 percent and -23.2 percent, respectively. Among the services sub-sectors, financial intermediation and renting and business activities were the most pessimistic.

The services sector was the least pessimistic an index at -1.8 percent. Hotels and restaurants expect brisker business during the summer season.

Those in the industry sector registered the lowest indices, mirroring general outlook of lower sales volume.

The average capacity utilization index in the first quarter declined to 71.5 percent.

Finances, jobs

Credit access and financial conditions are anticipated to be tighter

The credit access index slid further to -12.8 percent in the first quarter, indicating worries of tighter access to credit. Respondents anticipated that the financial turmoil would make banks more risk averse in the coming months and would likely impose stricter credit standards.

Firms expected that they would be less liquid in the first three months of the year as the financial condition index dropped to -32.9 percent from -11.6 percent a year-ago. Respondents cited delays in the payment of orders as reason for their deteriorating outlook.

Meantime, the employment outlook index in the second quarter also slid to -8.2 percent. The outlook was weighed down largely by the negative sentiment of manufacturing firms, indicating that more firms are not planning to hire new workers in the second quarter.

Unsurprisingly, the number of firms that expressed expansion plans in the second quarter also declined. Compared to the 30.4 percent respondents that expressed expansion plans in the first quarter, only 17.8 percent said they will proceed with similar plans in the second quarter. - with AFP