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August 25, 2017

Economy grows 6.5% in Q2

The Philippine economy grew at a sizzling pace in the second quarter, topping expectations as a government-led construction boom and an extended rebound in the farm sector took some of the sting off a peso wallowing at 11-year lows. The Southeast Asian nation is the second-fastest growing economy in Asia after China, though some analysts cautioned that activity could wane if foreign investors are scared off by President Duterte’s deadly war on drugs. Gross domestic product rose 6.5 percent in the second quarter from a year earlier, the national statistics agency said yesterday, picking up from the 6.4 percent pace in the first quarter. “Our growth momentum is on track and that we would sustain our pace for the rest of the year as we continue to lay down the foundation of a comfortable life for all through increased investments in infrastructure and social protection,” Presidential Spokesman Ernesto Abella said in statement. While the 6.5 percent growth during the second quarter is lower that the 7.1 percent expansion in the same period last year, Malacañang regarded it as a welcome development. “This figure, which falls within the full-year target growth of our economic managers, puts us as one of the fastest growing major economies in Asia,” Abella said. “We are well on track to meeting our full-year target growth of 6.5-7.5 percent,” Economic Planning Secretary Ernesto Pernia told reporters at a briefing.
(Source: The Philippine Star, 18 August 2017)

The Philippine economy, as measured by real gross domestic product (GDP), accelerated by 6.5% in 2Q 2017. This is slightly faster than the 6.4% logged in 1Q 2017 but slower than the 7.1% recorded in the same period last year. Moving forward, much of the country's growth will hinge on ramped-up infrastructure spending, which should support the Duterte administration's commitment to build crucial projects throughout the country. The ushering in of the "golden age of infrastructure" also lends support to the government's decentralization push which should unlock land values in areas outside of Metro Manila and stimulate business activities in the countryside. Given this, we recommend that developers zero in on the thriving opportunities outside of the country's capital.

Retailers feel pinch of online shopping

The country’s retailers are now feeling the pinch of heightened competition from the once ignored, but now rapidly growing online shopping business, industry players told The Star. Samie Lim, chairman emeritus of the Philippine Retailers Association (PRA), said many of their members are losing some customers to online shopping, which has become a craze among consumers because of convenience and worsening traffic in Metro Manila. Among the popular online retail sites in the country are Zalora, Lazada and Weemall. “Definitely, with online we’re affected. The numbers are not yet big now but obviously it is growing very fast,” Lim said in a recent interview. The online retail market now accounts for about five to six percent of the total retail market from just one to two percent a few years ago, Lim said. To cope with the situation, brick and mortar retailers are stepping up their game by launching promotions and season sales. The PRA, the national organization of all retailers in the country, is also in talks with mall operators to help retailers cope with the situation. “Retailers are saying their biggest expense is rent which is why others are just going online so we should talk to the mall operators to bring down the rent,” Lim said. He said if traditional retailers don’t do anything about it, online sellers may soon eat a huge chunk of the market. “The tipping point may be in five years,” Lim said. Philippine Chamber of Commerce and Industry president George Barcelon shared the same view. He said competition from online stores is growing, noting the need to ensure a level playing field. “We want to make sure they are paying the right taxes,” Barcelon said.
(Source: The Philippine Star, 21 August 2017)

We believe that indicators point to strong household spending for the rest of the year with central bank projecting OFW remittances to rise by at least 4% this year to an estimated  USD31  billion and annual inflation rate still expected to hover within the central bank’s projection of 2-4%. Per capita GDP, a proxy for individual income, grew by 5%, providing impetus for developers to build retail outlets not only within Metro Manila but in other urban areas as well. Ayala is opening seven malls in Metro Manila this year while Rockwell Land is expanding its Power Plant Mall. Online shopping in the country has been gaining traction with more developers such as Ayala and SM partnering with online shopping platforms and logistics firms such as Zalora, Lazada, and 2Go to reach far-flung areas that are slowly becoming hotspots for online shopping. Amazon’s recent launch in Singapore is indicative of the growing interest in the Southeast Asian region given the people’s surging disposable incomes. However, dilapidated road and air transport infrastructure raise the cost of doing business and hinder online shopping and logistics firms from making massive investments.

Initial 10 companies keen to build P12.55-B Clark airport

Ten local and foreign entities have expressed interest in the new P12.55-billion Clark International Airport Terminal. Bases Conversion and Development Authority President Vivencio B. Dizon told reporters last Friday local firms Megawide Construction Corp. and Metro Pacific Investments Corp. as well as South Korean company Posco were among those that bought bid documents for the engineering, procurement and construction of Clark International Airport facilities. “Alam ko parang (I know about) 10 as of today,” Mr. Dizon said, noting that more companies are expected to buy bid documents until the October deadline. “You can buy bid documents until bid submission in October. Dadami pa talaga ’yan (That will surely increase).” The project will be awarded by the end of November with groundbreaking set in December 2017, Mr. Dizon said. Operation is expected to start on the first quarter of 2020. Clark International Airport is located in the Clark Freeport and Special Economic Zone, around two to three hours away from Metro Manila. The new terminal will consist of an 82,600-square meter terminal building that can accommodate eight million passengers annually — almost twice the terminal’s current capacity of 4.2 million passengers. Clark airport is being tapped by the government to be an alternative gateway in order to decongest Ninoy Aquino International Airport, which accommodated over 39.5 million passengers in 2016, way above its capacity of 30.5 million. The government will be in charge of building the facility, after which it will be turned over to the private sector for maintenance and operation.
(Source: Business World, 21 August 2017)

We believe that the expansion of the Clark International Airport will play a crucial role in providing an alternative gateway to Luzon travelers. However, the airport should be complemented by the implementation of railway projects from Malolos, Bulacan to Clark Green City. We believe that the construction of these infrastructure projects supports the current administration’s thrust of ushering in the “golden age of infrastructure” and creating more economic opportunities outside of Metro Manila. Overall, the completion of these infrastructure projects, supported by the Duterte administration’s decentralization push, should unlock land values in key provincial locations outside of the country’s capital such as Pampanga.



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