Business sentiment lowest since 2010 — BSP

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Metro Manila (CNN Philippines, September 6) —  Business sentiment is at an eight-year low caused by a number of economic factors, according to the latest survey of the Bangko Sentral ng Pilipinas (BSP).

The business confidence index (CI) for the third quarter is at 30.8 percent, based on the BSP's quarterly Business Expectations Survey.

"Business outlook on the economy turned less optimistic for Q32018, with the overall confidence index (Cl) declining to 30.1 percent, the lowest level since Q12010. This means that the number of optimists declined but continued to be greater than the number of pessimists during the quarter," the BSP said in a statement.

Key reasons for this decline include higher prices of goods in the wake of the Tax Reform for Acceleration and Inclusion (TRAIN) law, weaker peso, higher prices of commodities in the global market, rising overhead costs, lack of raw materials, stiff competition and seasonal factors such as the rainy season and start of the school year.

The biggest decline in confidence came from the wholesale and retail trade sector, the BSP said. There was a less positive business sentiment and confidence for all sectors, whether they're involved in import or export.

Businesses also expect inflation to rise in the coming months, with the government faling to reach its 2-4 percent inflation target for 2018.  

"Businesses expected that the rate of increase in commodity prices will breach the upper end of the government's 2 to 4 percent inflation target range for 201.8, at 4.7 percent for Q32018 and 4.8 percent for Q42019," the BSP said.

Expectations on better financial conditions continue to be negative, slipping to -5.3 percent from -4.8 percent last quarter.

"However, firms were of the view that their financing requirements could be met through available credit as respondents reported easy access to credit," the BSP added.

Despite these factors, businesses are upbeat about the fourth quarter, with the CI at 42.6 percent. The BSP attributed these to the holiday and harvest season, rollout of government infrastructure, business expansion plans, and favorable weather conditions.

Businesses also have a more positive outlook on employment and expansion for the next quarter.