The Philippines attracts more foreign capital
Business Mirror by Tet Andolong, 04-02-2014
DESPITE all the challenges
that the Philippines faced
in 2013, the country's fundamentals remained
strong in the realestate industry
during the first quarter of 2014. Yes,
we are still being compared to our
neighboring countries like Thailand,
Indonesia and Vietnam. Other for
eign investors from, Australia, India
and Europe are also seen flocking
to the BPO sector. Southeast Asian
countries are experiencing substantial growth driven by the young population and rising income.
"The country is a consumption-driven economy-more resilient to
global crisis. China aims to be more
consumption driven, thus this will
open opportunities for countries
such as the Philippines for manu
facturing," according to Yves Luethi,
vice president of KMC Mag Group
Inc., during a recent press briefing at
the Makati ShangriLa.
The Philippines has a gross domestic product (GDP) growth rate
of 7.2 percent, which is higher than
Thailand's 3.1 percent; Indonesia's
5.2 percent and Vietnam's 5.3 percent. There are seven reasons why:
1) The country has a sweet spot in its
demographics; 2) The tourism sector continues to grow; 3) It has a talented labor pool; 4) It has a continuously growing BPO sector; 5) There
is strong domestic consumption; 6)
OFW remittances have remained
steady; and 7) There is increased government spending
According to the National Statistical Coordination Board (NSCB), the
last quarter of 2013 boosted the country's economy by 6.5 percent yearonyear despite the adverse effects of Supertyphoon Yolanda. The majority of
the growth came from the industrial
sector, which grew by 9.5 percent, led
by manufacturing and construction,
while the services .sector grew by 7.1
percent, led by real estaterelated services and financial intermediation. The
strong performance of the realestate
sector contributed a total of 16.6 percent to GDP in forms of construction
and real estaterelated services. This
sector grew by 9.3 percent in 2013,
which signals a thriving local realestate market.
On the demand side, strong private consumption that forms 69.4
percent of the GDP retained its stable growth rate and expanded by 5.6
percent. The Philippines's trade balance remained slightly negative as
exports stalled and imports kept rising. However, the rebounding world
trade and the depreciating peso is expected to shift the trade balance back
to positive on the first half of 2014.
Manila's luxurious condo units
are still the most affordable. "Demographics and urbanization will take
care of the demand in the long run.
The question is if prices are sustainable or if they should be corrected,"
said Melo Porciuncula, KMC Mag
head of capital markets and investments. "Value appreciation remains
justified with healthy yield spread of
6.0 percent to 8.0 percent."
The current stock of residential
condominiums is at 185,000 units
of which around 168,000 units are
midend and 17,000 units for high-end, while 103,000 units are in the
pipeline. Onefourth of new supply
is concentrated in Quezon City and
almost 83 percent of the new supply
taps the midend market.
Meanwhile, the IT business
process outsourcing (ITBPO) sector
is fast growing and expected to hit
$18 billion this year. The industry's
workforce is expected to create up
to 124,000 jobs, bringing the total
number of employees to one million,
of which 75 percent of the employees
in the country's ITBPO are employed
in Metro Manila.
Cash remittances from OFWs
reached $22.8 billion in 2013, 6.4
percent higher than the previous
year's level. The solid growth of re
mittances from OFWs remains supportive of economic activity accounting for 8.4 percent of GDP in 2013.
Significant part of OFW remittances
comes from the Middle East, remittances boost the private consumption and retail.
The tourism industry is still rising according to Luethi. "The Philippines welcomed a total of 4.6 million
foreign visitors in 2013, a 9.6percent
growth vs. 2012. The Department
of Tourism is targeting to achieve
6.8 million international visitors in
2014, which is more than a 20percent increase from the previous year.
They further expect to reach 10 million international visitors by 2016
and this may result in a shortage of
hotels," added Luethi.
For 2014, KMC Mag Group expects the year to be better than 2013.
The positive outlook for all economic
indicators will keep the Philippines
on the radar, especially now that investors are aware that the country's
capital is the top realestate market
in the region. This growing interest is expected to convert to actions
in the markets given that Manila is
quickly rising as an alternative, calling for better market transparency
and more accurate information.