(STAR) By Des Ferriols - Business became less optimistic of their prospects for the third and fourth quarters of the year, indicating more caution even before the disruption caused by the crisis in the US credit market.

The Bangko Sentral ng Pilipinas (BSP) said yesterday that its recent Business Expectation Survey (BES) showed possible business expansion and rise in employment in the next months before the onset of the holiday season.

However, the BSP said that even before the blow-out that triggered a global sell-off of stocks, Philippine businessmen were already edgy over the emerging problems in the US housing market.

The survey covering the third and fourth quarters was conducted in late July and early August, long before the US housing problems exploded into a full-blown crisis in the US credit market.

The quarterly BES indicated that the confidence index of business enterprises remained strong at 40.9, up by 19.2 index points compared to last year, but fell by 5.5 points from the previous quarter’s survey results.

According to Central Bank Deputy Governor and officer-in-charge Diwa Guinigundo, more firms indicated expansion in their activities in the coming two quarters.

Guinigundo, however, said there was a slightly more cautious business outlook in the third quarter compared with the second quarter.

He said respondent firms attributed this to the slackening of production for the third quarter due to seasonality.

Guinigundo said even before the break-out of the US credit problem, businessmen were already anticipating a slowdown in the US economy because at the time, it was apparent that the US was having problems in the housing market.

“The rest of the concern is related to the usual anticipation of competition, with cheap imports from China, the increase in crude prices as well as power and water shortage,” he said.

On the other hand, Guinigundo said there was some optimism over prospects in the fourth quarter that businesses attributed to better macro-economic conditions reflected in low inflation, stable interest rates, strong peso and improved investment conditions.

Guinigundo said businesses were also counting on increased remittances from overseas Filipinos, as well as the solid performance of Asian economies and the onset of the holiday season, which is always accompanied by an increase in domestic consumption.

The BSP said a breakdown of respondents indicated that importers, along with importer-exporters, were the most optimistic, while exporters were generally more grim.

According to Guinigundo, businesses in Metro Manila were generally more optimistic than their counterparts outside the capital. But both sections of the business sector noted that their access to financing had improved and this was reflected by the increase in bank lending during the period.

Guinigundo said optimism was strongest in the construction sector, which reflected the growth in the property sector.

He said this was the sector that also exhibited the highest expectations in terms of employment, indicating that construction-related job creation would be on the rise.

Chief News Editor: Sol Jose Vanzi

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