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November 22, 2008

Central bank sees bleak X’Mas for Philippine businesses
Philippine businesses expect this year's Christmas holiday season to be the gloomiest in seven years and are not planning to hire more people for expansion in the new year, Reuters reported, quoting a central bank survey.

But falling world oil prices and a seasonal pick-up in consumer demand in the fourth quarter were helping buoy investor morale, according to the business expectations survey.

"The bearish outlook on the macroeconomy mirrored the weak global sentiment due to the global economic slowdown and the financial turmoil," the central bank said.

Heightened investor concerns about the impact of the financial turmoil on the economy kept the overall business outlook index in negative territory in the fourth quarter, though it improved to a negative 6.8 percent from a negative 12.9 percent in the previous quarter.

It was the first time since 2001 that the fourth quarter index turned negative. Then it stood at a negative 32.6 percent.

The survey, conducted between Oct. 1 and Nov. 5, covered 1,242 firms, 515 of which are in or around Manila.

Most of the firms anticipate tighter access to credit in the fourth quarter, as they expect banks to impose stricter lending policies to reduce their risks, the bank said.

They also expect commodity prices to stay high until the first quarter of 2009, with the currency expected to remain weak in the fourth quarter.

Businesses had better expectations for the first quarter of next year, with the confidence index at a negative 0.5 percent, but companies said they were unlikely to hire in the period.

The first quarter employment outlook index dropped to negative 1.4 percent from 8.3 percent in the previous quarter.

"This indicated that more firms will not hire new workers in first quarter of 2009 even as about 30.4 percent of respondents from the industry sector expressed expansion plans in the first quarter of 2009," the central bank said.

"Expansion could be in the the form of capital investments that would cut operational costs and improve efficiency."

The monetary authority's quarterly survey is calculated by subtracting the percentage share of firms that have a deteriorating outlook from the percentage of firms whose outlook is improving. The results help to set monetary policy.

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