THERE used to be more, but the number of businessmen intending to expand operations and hiring more people over the short term has diminished significantly, data from the Bangko Sentral ng Pilipinas (BSP) show.
While those intending to expand accounted for nearly 34 percent in the first three months, less than 25 percent of their number had such plans by the second quarter.
The drop in business plans was also noted across all sectors but was most pronounced among the utilities firms such as electricity, gas and water companies.
This mirrored a report the BSP released on Thursday showing continued business optimism overall no matter the sharp diminution in the ranks of optimists, called the diffusion index, or DI, to 31.8 percent from 47.5 percent just three months earlier.
“About one in every four firms in the industry sector, or 24.7 percent, indicated expansion plans for Q3-2011. However, the number of respondents who said so declined compared to a quarter-and-a-year ago,” Rosabel Guerrero, a director at BSP’s Department of Economic Research, said.
Three months earlier, the diffusion index stood at 33.9 percent, the highest it has reached since the BSP regularly surveyed the business sector in the second quarter of 2001 to get a feel of where business sentiment was going.
According to the BSP, the largest drop was posted by businessmen in the various utilities firms where the index dropped to only 23.8 percent from 38.5 percent three months earlier.
This happened in a period when the average capacity utilization, an indicator or optimal use of rated production capacity, also averaged lower to 75.1 percent from 75.3 percent, the BSP said.
The various manufacturers also exhibited significantly less optimism, with the index at only 24.2 percent from 32.5 percent. The agriculture sector managed only 24.3 percent from 45.3 percent.
Even the mining sector, historically the most optimistic among the four main sectors, showed diminished enthusiasm for business-expansion programs during the period and posted an index averaging only 41.8 percent from 47.3 percent.
Competition, weak demand and financial problems were cited as the biggest limiting factors to business plans during the period.
Nevertheless, BSP Gov. Amando M. Tetangco Jr. said while business confidence has ebbed, there remains the optimism that local output measured as the gross domestic product, or GDP, will continue to be positive.
“We think the economy will continue to grow this year. Although projected growths of 7 to 8 percent was arrived at prior to the events at the Middle East and North Africa (Mena) region as well as the earthquake, tsunami and nuclear disaster in Japan, the expectation is that the subsequent rebuilding and reconstruction will have a positive impact on economic growth,” he said.
According to him, it should not be a surprise when actual growth this year should prove “lower than the 7-percent to 8-percent target.”
The impact of the political upheaval in the Mena countries and the disaster in Japan should only have short-term negative impact.
“Long-term growth is still going to be positive,” Tetangco said.
