Business confidence at its lowest - Survey

BAGUIO CITY– Business confidence last month plunged to its lowest level for the year, according to the latest study of a New York-based market research outfit.

Notwithstanding statistics that showed robust growth for the second quarter, RoperASW, a market research organization based in the US and a top market research outfit worldwide, said confidence of businessmen plummeted as the government’s fiscal deficit widened and economic reform stalled, which had bee a paramount concern of the business community.

A survey project by RoperASW from Aug. 22-27 covering 300 randomly selected respondents who work for companies that belong to the country’s top 7,000 corporations also showed that President Arroyo’s rating touched bottom.

Businessmen are also hinting of retrenchment in the months ahead, both in terms of their workforce and their investment plans because of mounting anxieties, the study says.

The RoperASW Business Confidence Index last month nosed-dived nearly 12 points, the largest decline in 14 months, to the 84.8 index level, equaling the year’s low posted last January.

The Business Confidence Index is a monthly composite measure of how local businessmen view the present economic situation and the economy’s prospects over the next six months.

Purely politics, no economic direction

RoperASW says that the general perception is that politics has dominated the concerns of government. "There is not much direction, it’s not very clear where the economy is headed as regards the major concern of business, such as fiscal deficit and the banking situation," Roper ASW quoted in its report Francis M. Varela, vice-president at AB Capital and Investment Corp. as saying. "Government knows what the problems are but the grand solutions are not there," he added.

Varela adds that "the economy on the aggregate is good but investments continue to lag." He believes that a slack in investments suggest that growth is not sustainable over the long term.

Last Aug. 29, the government reported that the domestic economy grew by 4.5 percent which is the fastest quarterly growth in five years. For the first semester, the local economy expanded 4.1 percent.

But a week before the GDP came out, government reported that its seven-month budget deficit had reached P133.1 billion, which is P3.1 billion more than its deficit ceiling of P130 billion for the entire year.

RoperASW says that, "businessmen fear that a runaway fiscal deficit could lead higher government borrowings, which in turn, could put pressure on local interest rates to rise." It even cited that the bellwether 91-day Treasury bill rate has climbed some 120 basis points since bottoming out at four percent last April.

Businessmen were more upset with the current situation than six months ago, the RoperASW study also says. Only 16 percent of those surveyed, think current business is good. This percentage is sharply down from the prior month’s (July) 24.3 percent and also happens to be the lowest since November 2000, when a miniscule four percent shared this optimism.

Some 42.3 percent of the respondent-businessmen said business conditions (in the country) are bad.

Government’s performance rating also suffered a sharp reversal, erasing all of its hard-earned gains over the previous three survey periods. Those who said that "government is doing a better job than a year ago" thinned down to just 26 percent, which is the lowest rating of the present administration since President Arroyo took power in January 2001.

"Those who were discontented with Mrs. Arroyo’s performance swelled to almost 28 percent, also a year’s high from just 16 percent, " RoperASW said.