(STAR) By Lawrence Agcaoili - Business confidence in the country reached an all-time high in the fourth quarter on expectations of sustained economic improvement and strong domestic demand, fueled in part by the steady stream of remittances from overseas Filipino workers and higher capital inflows.

The Business Expectations Survey by the Bangko Sentral ng Pilipinas (BSP) showed that the confidence index in the fourth quarter of 2010 reached an all-time high of 50.6 percent from 45 percent the previous quarter.

BSP director of the Department of Economic Statistics Rosabel Guerrero said the confidence index in the fourth quarter of the year is at its highest since the start of the survey in 2001.

The Q4 2010 Business Expectation Survey was conducted from Oct. 1 to Nov. 9 and covered 1,624 firms nationwide. Latest data from the BSP showed that remittance volume rose 7.8 percent to $13.782 billion in the first nine months of the year, from $12.789 billion in the same period last year. Remittances from sea-based workers increased by 11.4 percent while that of land-based workers went up by 6.9 percent.

On the other hand, foreign portfolio investment jumped by 587 percent to $2.5 billion in the first 10 months of the year from $358 million in the same period last year.

The confidence index is computed as the percentage of firms that answered in the affirmative less the percentage of firms that answered in the negative on a given indicator.

Guerrero said business sentiment has remained positive since the third quarter of 2009. Data showed that the confidence index steadily improved from 18.4 percent in the third quarter of 2009, to 22 percent in the fourth quarter of 2009, 39.1 percent in the first quarter of the year, 43.9 percent in the second quarter, and 45 percent for the third quarter.

In the third quarter of 2008, at the height of the financial crisis in the US, the confidence index plunged to -12.9 percent. In the first quarter of 2009, it rose to -23.9, and improved to -2.9 percent in the second quarter.

Guerrero said the stronger business outlook is consistent with the solid macroeconomic environment as shown by the narrowing of the country’s credit spreads, rising equity index, appreciating peso, and moderate inflation.

She said the favorable business sentiment mirrored the improving business confidence in Canada, Hong Kong, India, Germany, Italy, and New Zealand.

Business outlook in the National Capital Region (NCR) reached 55.7 percent in the fourth quarter from 51.6 percent in the second quarter, while business confidence in areas outside NCR measured 42.4 percent from 34.2 percent.

Businessmen, however, are less optimistic for the first quarter of 2011 on expectations of slower business activity after the Yuletide season Exporters expect lower demand because of the slow economic recovery of international markets from the global financial crisis. They are also wary of the continued strengthening of the peso.

BSP Deputy Governor Diwa Guinigundo said business optimism suggests that the 7.9 percent gross domestic product (GDP) growth in the first half of the year would be sustained. The Philippines barely escaped recession last year after posting a 1.1 percent GDP growth.

Chief News Editor: Sol Jose Vanzi

All rights reserved