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Business remains upbeat despite critical outlook on trade – MBC survey

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By Bernie Cahiles-Magkilat

 

Despite a critical outlook on trade and likelihood of higher interest rate and inflation and further depreciation of the peso this year, businessmen still remain optimistic the Philippine economy to either sustain if not surpass 2016’s GDP growth rate of 6.8 percent, a survey by the Makati Business Club (MBC) revealed.

In its First Semester Executive Outlook Survey for 2017, majority or 83 percent of the senior business executives of MBC members polled expect a higher or same level of GDP growth for 2017 compared to last year’s 6.8 percent growth rate. Only 17 percent of the respondents project a lower economic growth rate.

The MBC survey received responses from 76 out of its 380 (20%) corporate members; majority of these responses were received from senior executives and top management representatives.

The optimism ran high despite expectations of a higher consumer prices and inflation rate.

Based on the survey, 85 percent expect higher consumer prices while another high majority of 85 percent anticipate the country’s headline inflation in 2017 to be higher than last year’s average rate of 1.8 percent.

Only a small percentage of 12 percent expect inflation to stay at the same rate, while 3 percent project it to be lower than 2016.

Likewise, 57 percent of Makati-based businessmen foresee a higher 91-day Treasury Bill Rate than last year’s rate of 1.50 percent. Thirty-nine percent  still foresee constant interest rates and expect it to stay the same, while 4 percent expect to see it moving lower in 2017.

On the peso-dollar rate, a big majority of 80 percent of MBC members expect the peso to depreciate against the US dollar by an average of 5.16 percent by year-end 2017; the 2016 year-end rate was R49.82/$.

Meanwhile, 11 percent expect the peso-dollar rate to stay the same as end-2016, while the remaining 9 percent expect the local currency to appreciate against the dollar by 3 percent.

On prospective investments for 2017,  the survey showed that 29 percent of  respondents remain positive expecting an increase of approved investments from the 2016 figure, while 24 percent foresee the same level of approved investments this year.

On the other hand, 47 percent anticipate approved investments this year to be lower than the R89.4 billion recorded by the Philippine Statistics Authority last year.

On trade, the general outlook is slightly critical, as a significant number of MBC members project a decrease in both imports and exports.

Fifty-three percent of respondents expect exports either to increase (29%) or stay on the same level (24%) as last year’s exports figure, while close to half (47%) expect lower exports than last year’s $51.36 billion (from January to November).

For imports, 64 percent expect lower imports than last year’s $73.72 billion, while 24 percent expect it to stay the same; the remaining 12% stay fairly optimistic and expect imports to be higher than last year.

MBC members also mirrored their overall optimism on the Philippine economy to their own corporate outlook with a large majority of the respondents projecting an increase in both gross revenues and net income in the coming year.

About 93 percent expect higher (83%) or the same level (10%) of gross revenues this year compared to last year, and only 7 percent expect their gross revenues to be lower than 2016. Similarly, 74 percent of the respondents also project higher net incomes in 2017, while 14 percent foresee no change, and only 12 percent expect lower net incomes this year.

On investments for 2017, the projection remains bright with 74 percent of the respondents said they will make additional investments in the coming year, with an average of P785 million; the highest projected investments of over P1 billion are under the Diversified / Conglomerate and Services sector.

In terms of workforce, 51 percent of the respondents plan on expanding their workforce; majority of these member companies planning to hire more workers belong in the Services sector. Meanwhile, 48 percent expect to hold their workforce size steady, while only 1 percent foresees the possibility of laying off workers.

The 2017 First Semester Executive Outlook Survey was conducted among MBC members from 2 February to 15 March, 2017. A total of 76 corporate members submitted survey responses, representing 20 percent of MBC’s 380 member companies, excluding foreign embassies and trade offices.

Of the total respondents, 84% are in top management, while 16% are in middle management. Majority of these respondents are Filipino (91%), while 9% are foreigners.

The Services sector make up the largest representation, with 46%, while Manufacturing and Non-Manufacturing industries make up 11% and 8%, respectively. 14% are from the Conglomerate/Diversified sector, and 3% are in Agriculture. Other sectors make up the remaining 18% of the respondents.    In terms of company size, majority of MBC members (62%) have annual revenues of over P999 million, while 12% record less than P100 million; 5% have P500-P999 million, 8% have P300-P499 million, and another 13% have P100-P299 million.

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