Omicron, expensive oil dampen business confidence in Q1

MANILA, Philippines — Businesses and firms were wary of their fortunes in the first quarter of 2022 as oil prices surged while the Omicron variant onslaught stoked a brief return to tight mobility, the Bangko Sentral ng Pilipinas reported on Friday.

Results of the BSP's nationwide survey of 1,498 firms from January 21 to March 4 revealed the overall business confidence index (CI) weakened to 32.9% at the start of 2022, from 39.7% in the preceding quarter.

Aside from the Omicron variant surge, businesses weren't so keen on the impact of expensive oil and fuel prices. For polled firms, top of mind for them were waning demand in sales, goods and services, a weakening peso and the impact of natural calamities on their businesses, such as when typhoon 'Odette' hit the country days before Christmas.

Firms were optimistic that the second quarter would prove better for their business, considering that the economy has fully reopened more or less. The overall CI for the incoming period rose 59.7% compared to 52.8% in the preceding quarter.

These firms were increasingly bullish since they expect the next 12 months would be good for business, evidenced by overall CI of 69.8% from the previous quarter's 67.6%.

Sought for comment, Michael Enriquez, chief investment officer at Sun Life Investment Management and Trust Corp., said this trend would be sustained if oil prices do not rise further. Oil prices breached the $100 per barrel mark this year as two events collided—economies ramped up demand as they began to reopen while Russia began invading Ukraine.

"I believe so long as the higher oil prices won't persist. Sentiment may dampen again in case the government gives in to a wage hike," he said in a Viber message.

Labor groups are clamoring for daily minimum wage hikes as rallying oil prices hit the poor. The Trade Union Congress of the Philippines has filed three separate petitions for minimum wage increases in several regions across the country, notably in Metro Manila where they proposed an increase in daily pay to P1,007.

"Businesses are just starting to recover and higher input costs may again derail their recovery," Enriquez added.

Likewise, businesses were positive that recovery would be in sight in the first quarter of 2022 as CI surged 52.8% from 31.9% in the previous quarter. The next 12 months would be better for companies, as overall CI grew 67.6% from 56% in the preceding quarter's result.