Business confidence index shows recovery

The Jakarta Post , Jakarta

Business confidence recovered in April and May due to the relatively peaceful legislative elections, with corporate leaders becoming increasingly convinced that the government will be able to maintain order during the presidential election, a survey says.

Danareksa Research Institute's business sentiment survey said the business sentiment index (BSI) climbed 0.6 percent to 113.4 in April and May as a result of a 1.2 percent increase in the expectation index (EI) to 119.8.

"On the back of improved sentiment regarding the country's sound recovery prospects was the absence of violence during the legislative campaign in March. The peaceful campaign sets a positive precedent for the upcoming presidential election," the survey said.

The survey was based on responses from some 700 CEOs and directors of leading companies in a range of sectors from construction to tourism.

A figure of 200 represents the most optimistic outlook. If the index is below 100, it means that pessimism outweighs optimism. A figure of 0 signifies the most pessimistic response possible.

Despite rising confidence, however, the corporate leaders had doubts about business expansion.

"Businesspeople were uncertain if sales could perform well at a time when legislative election news dominated everything on a day-to-day basis, irrespective of their stronger confidence in the nation's recovery in the making," it said

The uncertainty, coupled with upward cost pressures, had caused sentiment indices that gauge corporate progress to decline.

However, the survey said, business prospects from June to November remain sound. CEOs felt upbeat on their company prospects, and expected their sales growth to accelerate, thus generating stronger cash flows and higher profits.

They were also convinced that the government was still effective in managing the country during the presidential election, as reflected by the rise in the government index (BCGI) to 88.9 from 88.6, the survey said.

The CEOs believed the presidential election would not derail the business recovery process in the making, as the government had shown itself better at controlling security.

"Should the presidential election pass without commotion, vigorous business momentum shall return," it said.