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PH ranks highest in business optimism in ASEAN

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By Bernie Cahiles-Magkilat

Optimism in the Philippines’ economic outlook for 2019 ranked the highest in the upbeat Southeast Asia region in contrast to the more reserved global outlook, according to the International Business Report (IBR).

 

Marivic Españo, Chairperson and CEO, P&A Grant Thornton

Marivic Españo, Chairperson and CEO, P&A Grant Thornton

The latest Grant Thornton IBR revealed that the positive outlook for the Philippine economy is at net 66 percent, followed by Indonesia at net 61 percent, and then by Vietnam and Malaysia at net 38 percent.

The business outlook for the Philippines also reflects the outlook for both ASEAN and the rest of Asia Pacific — optimism has slightly dropped, but the region remains more optimistic than other parts of the world. Optimism in ASEAN stands at net 42 percent, down from 64 percent in Q2 2018. Optimism in the Asia Pacific region, on the other hand, has also dropped from net 55 percent to net 34 percent.

Businesses in the Philippines have grown their revenue by more than five percent in the past year, according to IBR data. As a result, two-thirds of business leaders surveyed are very optimistic about the local economy this 2019.

For this year, Filipino business executives expect to earn more, charge more, and employ more. A vast majority of 70 percent of executives surveyed expect their business’ revenue to increase in the coming year — a contrast to the more reserved global outlook at net 39 percent. Sixty-six percent of IBR respondents also expect to increase the selling prices of their products and services.

In addition, 52 percent of those surveyed intend to increase their exports this year, while 62 percent plan to employ more people in 2019. 65 percent of business leaders surveyed hope to increase the salaries of their employees over the next 12 months.

While the general outlook for the Philippine economy remains very optimistic, financial constraints are seen as the most significant external barrier to expanding internationally, the report added.

The report further noted that ASEAN and China have held up far better than the advanced economies of Europe; ASEAN countries are trading effectively amongst themselves, thanks to year of economic cooperation, collaboration, and integration.

Following a period of heightened optimism and strong economic growth, the global outlook for businesses in 2019 is markedly more reserved as the economic cycle cools and political uncertainty begins to bite, according to the latest research from Grant Thornton’s IBR.

The research, which gathers responses biannually from 5,000 business leaders in 35 countries including the G20, found that global optimism is now sitting at net 39 percent, a significant fall of 15pp from 54 percent in Q2 2018, and the weakest score since Q4 2016.

Economic uncertainty is identified by business leaders as the biggest risk, peaking at 50 percent, a rise of 22 percent from Q2 2018. This can be partly attributed to geopolitical tensions, such as the US/China trade war.

Francesca Lagerberg, global leader Grant Thornton International said, “While global financial markets are increasingly volatile, business leaders in the real economy remain optimistic because global GDP is forecast to continue growing and they know their business will grow with it. Despite increasing down side risk, economic fundamentals remain strong and opportunities exist.”

Traditionally, in times of economic uncertainty, additional expenditure and investment seems counter-intuitive and many businesses tend to shore up their operations and significantly reduce or cease investment. However, this is a time when investing in capabilities and infrastructure can pay dividends and, when the economy turns, prudent businesses can react with speed to take advantage.

“As the economic cycle cools, it’s clear that business globally won’t have it as good as they did in 2018. However, with the IMF predicting global economic growth of 3.7%, predictions of a recession are the exception rather than the rule. What we are seeing is a return to normality with more balanced and sustainable growth for economies,” said Lagerberg.

Marivic Españo, Chairperson and CEO, P&A Grant Thornton noted, “It doesn’t look like a downturn is on the horizon. Sentiment has more likely decreased owing to slower trend growth, subdued inflation and low macro volatility — a so-called ‘normalizing’ of the global economy.”

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