Business confidence continues to worsen: Survey
Business confidence continues to worsen: Survey
JAKARTA (JP): Business confidence again fell in the April-May
period due to domestic political uncertainty, according to a
survey conducted by the Danareksa Research Institute.
Danareksa said in a report released on Monday that the
business sentiment index fell to 110.1 from 113.8 on losses in
both the present situation index and the expectations index.
The agency said the drop in the two indexes was due to the
"sharp erosion of investor confidence in the government".
The survey involved some 700 CEOs and directors of companies
from various sectors.
The current domestic leadership crisis and economic woes have
created jitters among businesspeople. The People's Consultative
Assembly, the country's top legislative body, is planning to hold
a special session on Aug. 1 that could lead to the impeachment of
the embattled President Abdurrahman Wahid.
According to the survey, sentiment about the current economic
condition fell 8.24 percent in view of the deteriorating business
environment on the back of growing political tensions.
The index that measures business conditions declined by 3
percent, as businesspeople felt the brunt of the economic and
political instability, with all key economic variables straying
farther from their business assumptions, the agency said.
As such, the businesspeople expected prices and interest rates
to go further north and the exchange rate and the composite price
index to go further south, broadly dampening corporate prospects,
the agency said.
According to the survey, the confidence of businesspeople in
their own companies slipped slightly to 148.8 from 149.9 on the
back of across-the-board declines in the sentiment on capital
spending, sales, profit, liquidity and the use of production
capacity and labor.
The agency said the increasingly grim economic outlook pulled
sentiment down by 7 percent to 72.7 from 78.1, as the short-term
effects of the current political turmoil could be hugely
destabilizing in fragile political situations.
The sentiment on the business outlook also weakened 4.3
percent in the face of a crumbling rupiah and rising interest
rates that have pushed up the cost of debt servicing, the agency
said.
"With a bleak picture of the economy, confidence in the
corporate outlook also lowered to 153.9 from 156.2, as business
executives are wary of companies' growth prospects," the agency
said.
The agency said the prospects for an imminent recovery for
both the economy and companies looked slim, with the rupiah more
likely to weaken than strengthen.
Businesspeople will take a bigger hit from all angles given
the rising spiral of inflation-depreciation that would be further
ignited by likely rises in SBI (Bank Indonesia promissory notes)
rates, fuel and electricity prices, the agency said.
"They are squeezed between lower sales revenues and higher
costs, with profits on the wane," the agency said, adding that it
was too risky to proceed with any business plans, even if the
unpredictable risks could be reliably hedged, with the risk
premium difficult to assess in advance.
Accordingly, there will only be a sparse appetite for new
business deals, since a decrease in labor hiring and capital
spending over the next six months, coupled with higher jobless
rates, appear on the cards, the agency concluded. (03)