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Manila Market Intelligence June 1, 2021

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Cash remittances growth fastest in five months

NEWS

Data from the central bank show that cash remittances grew 5.1% YOY to USD2.5 billion (PHP118.9 billion) in February 2021 from USD2.4 billion (PHP113.2 billion) in February 2020. Similarly, personal remittances rose 5.3% YOY to USD2.8 billion (PHP132.5 billion) in February 2021. Cumulatively, personal remittances for January to February 2021 grew 1.6% YOY to USD5.7 billion (PHP271.4 billion). UnionBank Chief Economist Ruben Carlo O. Asuncion attributed the growth in remittances to the improving economic situation of host countries such as the United States. However, ING Bank Senior Economist Nicholas Antonio T. Mapa cautioned against the considerable drawdown in the number of OFWs amid repatriation and renewed restriction measures in selected countries.

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RESEARCH VIEW

Colliers believes that remittances from Overseas Filipino Workers (OFWs) continue to drive the demand for affordable to mid-income (PHP1.7 million to PHP5.9 million or (USD to USD) residential units within and outside Metro Manila. Colliers has observed a sustained take-up of v horizontal units in key cities outside of Metro Manila such as Cavite, Laguna, Batangas, Cebu, Iloilo, Davao and Pampanga. In our view, the demand in these provinces is likely to be supported by the completion of key public projects such as toll roads which should improve connectivity and potential for capital appreciation. Colliers encourages developers to constantly monitor the COVID-19 situation in countries that are major sources of remittances, For 2M 2021, the United States, Saudi Arabia and Singapore accounted for about 50% of total OFW remittances. We also recommend a strategic land banking approach in key areas outside the capital region.

IT-BPM sector posts 2020 growth despite pandemic pinch
 

NEWS

The IT and Business Process Association of the Philippines (IBPAP) said that the outsourcing industry continued to post growth in 2020 despite the impact of the pandemic. Full-time employees increased by 23,000 last year, bringing the total industry headcount to 1.32 million. Meanwhile, industry revenues also rose to USD26.7 billion (PHP1.3 trillion) in 2020, up 1.4% from a year ago. IBPAP added that among the industries that thrived during the pandemic include e-commerce, healthcare, banking, finance and insurance. In 2021, 87% of outsourcing firms are projecting a growth of between 5-15% in 2021, while 13% are expecting flat growth.

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RESEARCH VIEW

In Q1 2021, Colliers recorded 8,000 sq metres (86,100 sq feet) of office deals from outsourcing firms, down 77% from the 35,000 sq metres (376,600 sq feet) recorded in Q1 2020 as we continue to see a challenging office leasing environment. To minimize disruptions in business operations caused by the rising COVID-19 cases in Metro Manila, Colliers has observed that outsourcing firms have been occupying and looking for office space outside of the capital region such as Pampanga, Iloilo, and Cebu. These firms also see long-term opportunities in terms of tax perks from the implementation of the CREATE law. In our view, outsourcing firms taking a wait-and-see stance should assess post-pandemic options and consider short-term leases in serviced offices. This should allow firms to minimize capital expenditures and save on operating expenses.

 

Philippines remains in recession as GDP shrinks 4.2% in Q1

NEWS

Data from the Philippines Statistics Authority (PSA) show that the country’s Gross Domestic Product (GDP) in Q1 2021 contracted by 4.2%, marking the fifth straight quarter of economic contraction. However, Q1 2021 GDP appeared to show signs of recovery, as it grew 0.3% on a seasonally adjusted basis QOQ. Out of all components in expenditure share, only government spending was able to post a growth, at 16.1%. Other components such as household spending, investments, imports and exports, and services all recorded declines in Q1 2021. Despite the slight improvements in economic data, the recent surge in cases and re-imposition of a stricter lockdown might reverse foreseeable recovery. This weakness in economic rebound, however, signals a possibility for the Banko Sentral ng Pilipinas (BSP) or central bank to once again cut interest rates this year, helping to keep inflation rate within the target range.

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RESEARCH VIEW

In our opinion, the impact of the pandemic continues to weigh on the property sector. Colliers saw the pandemic and the imposition of a stricter lockdown in the capital region and neighboring provinces resulting in project delays, as well as slower pre-leasing and take-up of office space and residential condominiums. In 2021, Colliers sees average office rents and condominium prices dropping by 15% and 5.9%, respectively from a 17% and 13.2% decline in 2020. In our view, recovery in office and residential demand will likely hinge on the pace of the government’s Covid-19 inoculation.

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Joey Bondoc

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Prior to joining Colliers in March 2016, Joey worked as a Research Manager for a research and consutancy firm where he handled business, political, and macroeconomic analysis. He took part in a number of consultancy projects with multilateral agencies and provided research support and policy recommendations to key government officials and top executives of MNCs in the Philippines.

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Martin Aguila

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