Businessmen are more optimistic about economic prospects in 2002 as compared to 2001, reflecting continued support and approval for the Arroyo administration. Forty five percent of business executives polled in MBC’s January 2002 Executive Outlook Survey said they expected the economy to perform better in 2002 than in 2001. Almost one-third said they expected the same performance in terms of GDP growth in 2002: an expansion of 3.2%.

The optimism was reflected in terms of projections for the inflation rate, interest rates, investments, exports, and imports. Forty six percent of executives polled (the plurality or single-largest block of responses in the survey) said they expected inflation rates to remain the same as last year’s while another 27% stated they expected it to drop further. Inflation averaged 6.1% in 2001, hitting a 16-month low of 3.9% in December. Forty seven percent of businessmen also felt that interest rates would drop as well as compared to 2001.

Following the difficulties of 2001, executives said they were projecting a comeback in investments and trade. Forty six percent said investments would rise in 2002 while 42% and 44%, respectively projected increases in both exports and imports, signaling a rebound in both the global and domestic markets.

Almost two thirds of the executives forecast a slight depreciation of the peso against the dollar with the average depreciation rate set at 5.9% over the year. Almost one quarter of the businessmen, however, said they expected the rate to hold steady.

Corporate Performance
The mood was clearly more optimistic when measured in terms of company performance. While the plurality of 44.8% saw an increase in gross revenues in 2001, 40.6% of the total sample reported declines in net income in 2001. The average decline was by 24% over the previous year, underscoring difficulties in the market in 2001.

For 2002, a strong majority of 60.4% is expecting increases in gross revenues while 55.2% are forecasting an uptick in net income in 2002. The average increase in earnings will be just under 13.0% this year.

The implications for the labor markets are good. Almost 70% of businesses will maintain their current workforces while 14.6% said they will be recruiting more new workers this year.

While more than half of the respondents will not be making additional investments in the next 12 months, a sizable minority of 45.8% said they will be making new investments in 2002. The median investment will be over half a billion pesos.

In spite of the difficulties faced by domestic manufacturers last year, the capacity utilization rate for factories held steady at 71% in December 2001, an increase over the 65.5% the year before and a slight improvement over the 70.6% in May 2001.

Government Perception
The overall optimism with economic prospects reflected strong approval for the economic leadership of President Arroyo and her administration, particularly of her team of economic managers. Among the top ranked agencies of government in terms of performance over the last six months, members of the economic team made up the majority of the top ten agencies.

Garnering the highest positive net satisfaction rate among 33 agencies evaluated was the Bangko Sentral (82.3%). The net satisfaction rate is the difference between the percent of respondents who were satisfied with the agency’s performance in the July-December 2001 period and those who were not satisfied. The others in the top five were the Department of Finance with a net score of 66.6%; Department of Budget and Management (60.4%); National Economic and Development Authority (58.4%); and Department of Trade and Industry (50%)

According to respondents, noticeable improvements were noted in the following agencies, enabling them to record jumps in their rankings: Bangko Sentral (from rank 9 in the July 2001 survey to rank 1 in the current survey); Department of Agriculture (from 23 to 15) and HUDCC (from 28 to 20). On the other hand, the biggest deterioration in performance, as perceived by the respondents, were in the following agencies: Senate (from rank 18 to rank 31); House of Representatives (from 19 to 28) and Department of Justice (from 13 to 22).

Issues and Concerns
As in past surveys, respondents were requested to enumerate what they believed were the three most positive developments in the preceding six months (in this survey, the July-December 2001 period). The developments which had more than 5.0% of respondents citing were low inflation rate (10.4%), GDP growth (9.4%), stable exchange rate (8.3%), and low interest rate (6.3%).

On the other hand, the issues that respondents thought that President Arroyo should resolve in the next six months (January-June 2002) included the law and order situation, graft and corruption, the economy, Abu Sayyaf menace, unemployment, garbage, and traffic.

More than enumerating issues of concern, the respondents were requested to recommend solutions to problem areas that were consistently cited in previous surveys. Respondents suggested measures to address the peace and order problem, stem the ever-growing fiscal gap, accelerate economic recovery, and curb graft and corruption in government.

Aside from the issues, respondents were asked whether the government’s economic agenda was clear to them. In the July 2001 survey, 54.3% of respondents said that the agenda was not well explained and this percentage deteriorated to 64.6% in the current survey.

For the first time since this survey was introduced, questions to get the business community’s views on population issues were included in the survey. Asked whether the government should be more pro-active in managing population growth, an overwhelming 87.5% of respondents answered in the affirmative.

About the Survey
The survey was conducted by the Makati Business Club in the first two weeks of 2002. It forms part of a series of surveys taken twice a year for the last 15 years.

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