MANILA, NOVEMBER 22, 2008 (MALAYA) Business outlook remained bearish and employers continued to remain pessimistic but were less pessimistic than the previous survey according to the Bangko Sentral ng Pilipinas.

Those surveyed said they expect tight credit, higher interest rates, weak demand that will mean lower sales and definitely no new hires.

The BSP said manufacturers were pretty adamant they cannot afford to employ new workers next year even if some of them plan to expand. Expansion will be done in new investments in machines that will cut costs and improve efficiency according to Iluminada Sicat, director of the BSP’s Department of Economic Statistics.

The survey also showed that for the first quarter of 2009, the number of pessimists outnumbered the optimists with the confidence index at negative 0.5 percent.

"Firms see that next year will be more challenging," Sicat said.

But in general, firms are more confident that the fourth quarter of 2008 will be "slightly better."

The survey showed that business confidence in the fourth quarter of 2008 improved slightly relative to the previous quarter, although the overall confidence index remained negative.

The confidence index at negative 6.8 percent, went up by 6.1 percentage points quarter-on-quarter, which may be due to the recent easing of world oil prices as well as expectations of a seasonal pick-up in demand and higher OFW remittances during the year-end holidays.

The bearish outlook on the macroeconomy mirrored the weak global sentiment due to the global economic slowdown and the financial turmoil, BSP said.

BSP said that the respondents attributed their negative sentiment largely to expectations of an economic slowdown and lower exports, especially to the US, the country’s major export destination.

Other reasons cited included the decline in consumer demand for certain commodities—particularly milk and other milk-based products due to the melamine scare, the peso depreciation and political noise.

Respondents from areas outside National Capital Region are less pessimistic than their counterparts from the National Capital Region.

By contrast, NCR respondents were pessimistic about general economic conditions in both the current quarter and the next.

Firms engaged in dual roles registered a negative index as they expected to be doubly hit by the weaker peso that would increase input costs, as well as lower demand for exports due to global economic slowdown.

The confidence index was, however, higher than last quarter, due in part to seasonality.

By contrast, exporters and importers were more upbeat as their indices were positive.

The respondents cited pick-up in orders due to seasonal demand and roll-back in crude oil prices as reasons for their positive sentiment.

BSP added that pessimists outnumbered optimists across all sectors in fourth quarter of 2008 except the construction sector which recorded an index of 6.6 percent.

The industry and wholesale and retail trade sectors registered indices of negative 5.8 percent and negative 9.8 percent, respectively.

Respondents from these sectors cited the weaker peso and lower consumer demand as the reasons behind their bearish outlook of the macroeconomy.

BSP said more firms from the construction and services sectors were confident that their current business operations would be better in the fourth quarter of 2008, although the index was lower than the comparable levels last quarter and last year.

Chief News Editor: Sol Jose Vanzi

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