BUSINESS LESS  OPTIMISTIC  IN  THIRD  QUARTER

MANILA, SEPTEMBER 2, 2006
(STAR) By Des Ferriols - Business optimism was down in the third quarter but sentiments are expected to improve in the next as bigger remittances from overseas Filipino workers will likely boost spending ahead of the Christmas season, results of a Bangko Sentral ng Pilipinas (BSP) survey showed.

The BSPís Business Expectation Survey (BES) revealed that the confidence index of the business sector, while remaining positive in the third quarter, is lower than the previous quarterís.

The survey showed the third quarter confidence index at 21.7 percent from the second quarterís 31.6 percent. The confidence index is seen to rise to 40.9 percent in the fourth quarter, largely on higher spending.

The BES survey, which is done quarterly, is a leading guide for business planning.

According to BSP deputy governor Diwa Gunigundo, business confidence was positive in the third quarter, although tempered by "geopolitical issues clouding the horizon" particularly the Israel-Hezbollah war and the resulting surge in international crude prices.

"Considering that they had those factors to think about, I think itís a good indication that the business sector was still very optimistic about the fourth quarter," he said.

According to Iluminada Sicat, managing director of the BSPís Department of Economic Research (DER), the confidence level was highest in the services sector, owing mainly to the anticipated surge in tourist arrivals, which would create tourist-related revenues for the tourism industry.

Industry was the least optimistic sector, weighed by the impact of rising oil prices, higher labor costs due to wage increases, and lackluster demand for manufactured goods.

Sicat said the prospect of a good harvest season had also contributed to the positive sentiment because it would bring down the cost of food and increase rural spending. Bigger government spending on infrastructure projects is also expected to raise business confidence.

"The survey indicated that business expected the volume to expand at a slower pace in the third quarter but to pick up the pace in the fourth quarter," she said.

Sicat said that what commonly troubled businesses were insufficient demand, stiff foreign and domestic competition, unclear economic laws particularly on taxation, liquidity problem and high interest rates.

On the whole, Sicat said businessmen expected the peso to continue appreciating while inflation rate was expected to remain.

Sicat said that while businessmen relished the relatively greater access to credit, they expected borrowing cost to remain high in the fourth quarter.


Chief News Editor: Sol Jose Vanzi

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