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June 23, 2024

Business confidence drops in Q1 due to Omicron wave

Businesses turned less optimistic in the first quarter of the year due to the resurgence of COVID-19 cases caused by the more contagious Omicron variant resulting to the reimposition of strict quarantine and lockdown measures.

Based on the Business Expectation Survey for the first quarter 2022, the overall business confidence index for the current quarter fell to 32.9 percent from the previous quarter’s 39.7 percent.

The lower positive index resulted from the combined effects of a decrease in the percentage of optimists and an increase in the percentage of pessimists.

According to the BSP, the respondents’ less buoyant outlook was largely affected by the resurgence of cases from the new Omicron variant and the consequent reimposition of stricter quarantine restrictions in many areas at the beginning of the year.

Other factors that contributed to the weaker business confidence include the increase in prices of raw materials and fuel and the decrease in sales or demand for certain goods and services such as motor vehicles, education services, and construction.

Businesses also cited the weakening peso and the adverse impact of natural calamities such as super typhoon Odette last December.

For the second quarter, the business sentiment turned more buoyant as the overall confidence index increased to 59.7 percent from 52.8 percent a quarter ago due to the decline in the number of COVID19 cases and further easing of community quarantines.

The respondents also cited an improvement in economic conditions and prospects of a recovery from losses incurred during the stricter community quarantines, the increase in volume of sales and orders as well as an increase in economic activity due to the upcoming elections.

For the next 12 months, the overall business confidence index also improved to 69.8 percent from 67.6 percent in the previous quarter.

The central bank attributed the buoyant outlook to the easing of quarantine restrictions and further reopening and improving state of the economy, an uptick in the volume of demand and sales as well as an increase in economy activity due to the upcoming elections.