by: Finella Kristle Panlilio
Friday, July 21, 2017 | Comments (0)
Category: Philippine Economy News
Moody's Investors Service ("Moody's") decision to maintain the Philippines’ investment grade rating and a stable outlook is a positive statement on the national government’s efforts to achieve economic growth, according to the Bangko Sentral ng Pilipinas (BSP) and Department of Finance (DOF).
A statement released by Moody’s said that the country's sovereign credit rating was maintained at Baa2, which is higher than the minimum investment grade, reaffirming a stable outlook on the rating.
"The decision of Moody's speaks well regarding the favourable path that the Philippine economy continues to tread, partly on account of the price and financial stability that comes on the back of prudent monetary policies and bank supervision," outgoing BSP Governor Amando Tetangco Jr. said in a statement.
"The banking sector, which remains strong and stable, will also continue to support the increasing potential output of the economy as it provides financing for growing investment and consumer demand," he added.
Furthermore, the statement also notes the Philippines' improving debt manageability, with the unconsolidated general government debt decreasing from 47.8 percent in 2009 to 38.3 percent of the GDP in 2016.
The country's credit rating is expected to remain stable as economic performance remains to be strong, according to Moody's.
Finance Secretary Carlos Dominguez III said that financial institutions, both domestic and international, have lauded the current administration's commitment to strengthening economic reforms.
He said that the "favourable" rating from Moody's highlights the government’s efforts to sustain economic growth by attracting more investments, and making it more inclusive through increased human capital and infrastructure spending.
Downside risks, such as the Marawi City conflict, could affect and potentially undermine institutional strength and economic performance, according to Moody's.
Dominguez said that the Duterte administration was on top of the situation and expects the conflict to be contained and bear minimal impact.
"This administration continues to take actions to sustain the growth momentum and enhance investor confidence in the economy, and the ongoing efforts toward strengthening national security are testament to this commitment," he said.
Moody's also raised concerns regarding US policies that encourage onshoring of jobs that can have a negative impact on the business process outsourcing (BPO) industry, which is the Philippines' major economic growth driver.
Dominguez asserts the BPO industry's strong position notwithstanding said foreign policies.
"At the end of the day, investors make decisions based on what is good for business. And the Philippines, with its competitive cost, and young and educated workforce, will continue to be a wise investment destination for BPO companies and other enterprises," he said.
The Philippines ranks as one of the best-performing economies in Southeast Asia during the recent years, despite the weakened demand for exports, as well as a subdued agriculture sector, with the economy positioned to become the next "tiger economy" among ASEAN countries, according to the latest report by global research and consultancy firm Oxford Business Group (OBG).
Its newest publication, "The Report: The Philippines 2017", stated that President Rodrigo R. Duterte's policy reforms like corporate income tax reduction will help the rising domestic consumption and growing services sector, as well as increase foreign investments.
Furthermore, losses in the agricultural sector will be compensated by industrial and manufacturing growth with more employment opportunities.
Public infrastructure is also forecasted to soar in the coming years, with the help of the private sector in the long-term transport development, which will present rich opportunities to foreign investors.
The Philippine Statistics Authority (PSA) reports that the Philippine GDP expanded at a rate of 6.8 percent in 2016, recovering from 5.9 percent in 2015, as a result of a strong domestic demand, a gradual recovery in exports and fiscal stimulus.
The report cited a 'promising' infrastructure spending, boosting foreign investments and increase in transportation development projects.
In addition, a projected 7 to 8 percent increase in GDP is said to be attainable over the medium term.
Paulius Kuncinas, managing editor for Asia for Oxford Business group, said, "The consensus is it is going to be the Philippines as the next tiger economy. The simple answer is that the Philippines is unique because it is a knowledge and service-based economy and consumption-led."
The BPO industry was named to be one of the driving factors for economic growth and will continue to see an uptick in high-value-added positions over the medium term.
Concentrating on neglected sectors such as mining and minerals should be encouraged, according to Kuncinas, as too much concentration in economic powerhouses can negatively affect the economy.
Developing the country's tourism industry can also significantly help grow the economy due to its service export potential.
Kuncinas urged the government to also focus on the ICT sector as it complements with other sectors.
He also cited the disparity between Metro Manila and rural areas in terms of economic, social, technological, infrastructure, and financial development that inhibits the latter from inclusive growth.
Business groups in the Philippines led by the Philippine Chamber of Commerce and Industry (PCCI), Management Association of the Philippines (MAP), and the Philippine Exporters Confederation Inc. (Philexport) agree that a gross domestic product growth of eight percent is likely to occur under the incoming administration.
In a statement, PCCI President George Barcelon said the agribusiness platforms of the incoming administration will make growth a possibility. He added that in recent years, the agricultural industry didn’t progress. However, an eight percent GDP growth can be achieved if the nation’s strengths are used to reinforce the agriculture segment.
Meanwhile, MAP President Perry Pe said incoming President Rodrigo Duterte can make a six-percent growth achievable, and he said it could even go as high as eight percent.
Philexport President Sergio Ortiz-Luis Jr. said the new administration has solid plans for the micro, small and medium enterprises (MSMEs), human capital, infrastructure development, increased agricultural and rural enterprise productivity, and rural tourism of the Philippines, and is looking to improve the ease of doing business to propel the country’s expected robust economic growth.
According to Budget Secretary Florencio Abad, the economic growth of the Philippines could increase to at least seven percent, driven by increased public spending and election-led expenses. He noted that the second quarter could post better growth figures.
The country’s gross domestic product (GDP) growth peaked at 6.9 percent during the first quarter, the highest quarterly growth since 2014. If projections are achieved, it will be the fastest since the 7.7 percent growth recorded in the first quarter of 2013.
Secretary Abad pointed out that for the second quarter, economic expansion was fuelled by faster procurement of public services and increased spending on the presidential elections last May 9. He added that the Department of Budget and Management has already developed a system to absorb big outlays which was downplayed during the succeeding years of underspending that affected growth.
Moreover, he said the economy’s performance could be further improved if the incoming administration will focus on attracting investments, support tourism, and bid out more solid infrastructure projects.
by: Sarah Joson
Tuesday, June 07, 2016 | Comments (0)
Category: Philippine Economy News
During the meeting of the Joint Foreign Chambers (JFC) of the Philippines in Makati City, Rick Santos, President of the American Chamber of Commerce of the Philippines (AmCham), said the Philippines is still the leading market and sweet spot in Asia.
Santos and other joint foreign chamber representatives discussed the reforms lobbied in the seven policy notes that were published last March. Recommendations for the business process outsourcing (BPO), agricultural, and creative industries, as well as infrastructure, mining, tourism, manufacturing, and logistics sectors were indicated in the policy notes.
Santos also said with the upbeat real estate market in the country, they will continue to push for the Real Estate Investment Trust (REIT) law and other improvements in the foreign ownership act to reinforce foreign investment in the country. He added that the Chambers will strive to achieve inclusive growth with the incoming administration.
Moreover, he emphasized that the theme of inclusion is fitting as the new administration steps in and external issues such as tensions rising over the South China Sea, the signing of the Trans-Pacific Partnership, and looming negotiations between the Philippines and the EU over a Foreign Trade Agreement could soon affect the economy.
According to CB Richard Ellis Philippines (CBRE) Philippines, Inc. founder and Chairman Rick M. Santos, business process outsourcing (BPO) firms are expected to sustain growth in the coming years. These companies are seen expanding outside Metro Manila, which is consistent with the incoming government’s platform of developing the countryside.
Santos noted that the demand for alternative business hubs like Quezon City, Alabang, and Bay Area outside of expensive and saturated Makati City and other primary business districts in Metro Manila is increasing.
For instance, rental rates at Bonifacio Global City are predicted to increase to P1,163 per square metre in 2020, from P957 estimated for this year. The CBRE executive also noted that as the demand in the BPO market grows and Metro Manila can no longer accommodate the growth, it is now crucial for new areas to be developed. Locations such as Laguna, Cavite, Bulacan, Pampanga, Cebu, Bacolod, Iloilo, Davao, Cagayan De Oro, and Zamboanga are said to be absorbing investments, said CBRE. These areas are expected to be easily accessed once improvements on infrastructure projects and numerous pending (public-private partnership) projects start.
According to Shanaka Jayanath Peiris, International Monetary Fund’s Country Representative in the Philippines, the country’s first-quarter gross domestic product (GDP) growth rate of 6.9% coincides with their target to achieve a full-year growth of 6%. The recent growth figure is also higher than the 5% GDP growth rate recorded during the same period of last year.
Election-related spending and strong domestic consumption are seen to fuel this growth which is also within the government’s projections of 6.8-7.8% for this year. The bulk of the growth was driven by the service sector at 7.9% and represented 56.8% of the economy. In addition to that, an 8.7% surge was posted by the industrial sector which collectively buoyed the economy, despite the 4.4% slowdown in the agricultural sector. Other key factors that reinforced the growth are the 25.6% surge in investment spending, as well as the 7% increase household consumption during the first three months of the year.
Even with the external risks from the continuous economic slowdown in China, and weakness in oil prices, IMF reported in its April issue of the World Economic Outlook that it is keeping its full-year growth projections for the Philippines, which is 6% for 2016, and 6.2% next year.
The IMF official noted that the rates are adjusted in line with the IMF’s targets. Also, it is expected that the Philippines will pick up the growth pace from the slow 5.8% in 2015, and become one of Asia’s better performers.
The Philippines posted a faster-than-expected 6.9 percent growth for the first quarter of this year. The nation is poised to hit full-year targets and is recognized as one of the best performers for the period in Asia.
Not only did the growth figure beat economist forecasts, it is also the highest quarterly growth recorded in the country since the last quarter of 2014.
According to Economic Planning Secretary Emmanuel Esguerra, the growth was achieved even with the poor output from the agricultural sector, slow exports, and months of focus on electoral campaigns prior to the May 9 election. He also said the outgoing administration is pleased to be turning over a strong and stable country to President-elect Rodrigo Duterte who will start his term on June 30.
He also noted that despite the noticeable decline in business confidence in the second half, the country is not derailed from meeting the government’s full-year growth target of 6.8 to 7.8 percent. Moreover, he said throughout outgoing President Benigno Aquino’s six-year term, the country posted the highest growth for the country at more than six percent.
The incoming government has recently signaled that it will uphold policy continuity. This has prompted Standard & Poor's to realize that the Philippine economy will stay on its present growth track.
The credit rating agency released a report indicating presumptive President Rodrigo Duterte's inclination to maintain the outgoing government's infrastructure program via the public-private partnership program and to continue efforts to revise constitutional restrictions on foreign investment.
The debt watcher also projected a six-percent gross domestic product (GDP) growth for the Philippines this year, which is higher than the revised 5.9 percent expansion in 2015, but is far from the government’s official GDP target of 6.8 percent to 7.8 percent.
One of S&P's previous concerns was the political uncertainties that could be activated under incoming President Duterte's term, noting that political volatilities could weaken the stability of the Philippine economy.
Duterte had mentioned his eight-point economic agenda, which delighted financial markets.
S&P also said in the report that the growing and educated middle class of the country will continue to fuel overseas employment and the outsourcing sector. This will then drive consumption and investment despite weak external demand.
Top economists from Dutch global financial institution ING and Bank of the Philippines Islands (BPI) predict that the country’s economic growth will reach nearly seven percent in the first quarter.
Nicholas Antonio Mapa, Associate Economist at BPI, explained that due to improved public spending, it is possible that the country’s gross domestic product rose 6.9 percent in the first quarter of this year, and is faster than the 6.3 percent posted during the fourth quarter of last year. He added that the Aquino administration will be closing on a high note as the first quarter gross domestic product (GDP) is expected to breach the six-percent mark, which could help the Philippines regain the top spot in the region.
Mapa cited strong consumption and improved government spending as factors for growth.
Meanwhile, the agriculture industry slowed down to 4.5 percent during the first quarter as a result of the El Niño phenomenon. But he noted that the services sector’s 10-percent contribution to the overall GDP will buoy the contraction in farm production based on the healthy first-quarter corporate earnings.
The economist also said Philippine economic growth will remain steadfast amid strong consumption, backed by years of accelerated growth.
On the other hand, Joey Cuyegkeng, Senior Economist at ING Bank Manila, anticipates a 6.6 percent growth for the country’s GDP. He cited strong domestic demand, favourable private sector investment, resilient structural inflows, election spending, and infrastructure spending will make up for the agriculture industry’s output.