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Survey on Business Expectations Indicates Improving Sentiment for First Semester 2002


Based on the results of the business expectations survey (BES) conducted in January 2002 by the Bangko Sentral ng Pilipinas, expectations on key leading indicators point to an upbeat business outlook for the first quarter of 2002.  The survey results also show significantly improved business expectations for the second quarter of 2002.

Positive Outlook for the First Quarter 2002

For the first quarter of 2002, respondent firms are broadly optimistic about business conditions as indicated by the overall diffusion index of 5.9 for the quarter.1  This showed that respondents with an improving outlook outnumbered those with a deteriorating outlook. The results of the survey indicated a favorable turnaround in perception from the 2001 fourth quarter survey’s expectations of a -9.8 diffusion index for January-March 2002.

Bullish Business Outlook for the Second Quarter

The overall business outlook of respondent enterprises for the second quarter of 2002 is considerably more bullish, with a 42.3 diffusion index. This outlook is consistent with the markets’ view of stronger domestic economic activity in the months ahead, in part because of expectations of improved global economic conditions and as the market-friendly reform agenda of the government continue to bear fruit.

Confidence Indicators

Starting this quarter, a new series called “Confidence Indicators” has been included as prescribed by the regional technical assistance (RETA) program sponsored by the Asian Development Bank (ADB).   The confidence indicators of the four major economic sectors (as defined in the survey) that summarize the tendencies of selected business variables for the current quarter and their expectations for the next are mostly favorable, mainly due to positive future tendencies.

Limiting Factors, Capacity Utilization and Expansion Plans

Among the factors that are viewed to limit business activity during the first quarter are competition and insufficient demand.  These two factors have been consistently identified during the past surveys as major factors constraining production and business activity.

With respect to capacity utilization, more than nine-tenths of the respondents replied that they are operating at less than full capacity for the current quarter.  Consistent with this, almost 80 percent of the respondent firms indicated that they have no expansion plans for the next quarter.

Starting the second quarter of 2001, the BSP has conducted the BES using the harmonized set of core questions for ASIAN countries suggested by ADB under its RETA 5938 program.  The survey covers 12 major industry groups (grouped into 4 major economic sectors), with firms drawn from the top 3,000 corporations in Metro Manila as listed by the Securities and Exchange Commission (SEC).  The first quarter survey, which was conducted in January 2002 with 234 respondent firms, had a slightly higher 39 percent response rate compared with the 36 percent response rate during the previous quarter.


1 The Diffusion Index (DI) is computed as follows: (1) for the “business outlook” variable: percentage share of firms that have an “improving” outlook less percentage share of firms that have a “deteriorating” outlook; (2) for the other business variables: percentage share of firms that answered that a given indicator would go “up” less percentage share of firms that answered that a given indicator would go “down”. With respect to these business variables, a positive DI indicates a favorable view, except for the average inflation rate, the average peso-dollar rate and the average peso-borrowing rate, where a positive DI indicates the opposite.

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