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Manila Market Intelligence June 21, 2021

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Tourism contribution to GDP lowest in at least 2 decades 

NEWS

Data from the Philippine Statistics Authority (PSA) show that the contribution of the tourism industry to the country’s GDP only accounted for 5.4% in 2020, down from the 12.8% in 2019. PSA added that this was the lowest since they started gathering data in 2000. In 2000 and 2002, tourism’s contribution to GDP was at 5.6%. Meanwhile, employment in tourism related industries was estimated at 4.7 million in 2020, or 11.9% of total employment. This was lower than the 5.7 million employed in 2019 or 13.6% of the total workforce. Tourism Congress of the Philippines (TCP) President Jose Clemente III said that he does not expect the tourism industry to return to pre-pandemic levels until 2023 or 2024. 

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RESEARCH VIEW

In Q1 2021, data from the Department of Tourism (DOT) show that foreign arrivals reached 29,383, down 98% from the 1.4 million arrivals recorded in 2020. The slump in foreign arrivals has resulted in average hotel occupancies declining to 20% in H2 2020 from 25% in H1 2019. Colliers believes that hotel occupancy is likely to remain below 30% in 2021 as tourists are still cautious of travelling due to the pandemic. Colliers recommends that hotel operators strictly follow the health and safety protocols implemented by the government. Hotels’ compliance with the anti-pandemic efforts laid out by the DOT should also be highlighted to attract more guests and recapture demand once market sentiment improves. In our view, the successful vaccine roll out should bolster travel confidence among foreign and domestic tourists and aid in the recovery of the tourism sector.

FDI decline by 16.5% in November, but expert sees uptake ahead
   

NEWS

Data from the Bangko Sentral ng Pilipinas (BSP) or the central bank show that foreign direct investments (FDI) in November 2020 reached USD537 million (PHP25.7 billion), down 16.5% from the USD643 million (PHP30.8 billion) in November 2019. Total FDIs as of 11M 2020 reached USD5.8 billion (PHP277 billion), down 10.8% from USD6.5 billion (PHP312 billion) in 11M 2019. The central bank attributed the contraction to concerns over the resurgence of COVID-19 cases and the re-imposition of quarantine restrictions. The central bank added that most of the investments came from the Netherlands, United States, and Japan and were mostly from the financial, insurance, real estate, and manufacturing industries. RCBC Chief Economist Michael Ricafort said that the rebound in FDIs will likely hinge on the government’s increased infrastructure spending and the enactment of legislative measures such as the Corporate Recovery and Tax Incentives for Enterprises (CREATE) bill.

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RESEARCH VIEW

Dampened investor sentiment due to the impact of the pandemic has affected the amount of approved investments into the country in 2020. Investments approved by the Philippine Economic Zone Authority (PEZA) in 2020 dropped by 19.2% to PHP95.0 billion (USD2.0 billion) from PHP117.5 billion (USD2.4 billion) in 2019. Despite the decline, we see a number of recovery enablers for the industrial sector. Data from the Philippines Statistics Authority (PSA) showed that the share of manufacturing, transportation, and storage to approved investments reached 67% in 9M 2020 from only 16.9% in 2019. We expect industrial hubs such as the Cavite-Laguna-Batangas (CALABA) corridor to benefit from these once they materialize and take-up space. Another growth segment for the industry is the logistics and warehousing sector driven by e-commerce and the emergence of a lockdown economy. We recommend that developers construct ready-built facilities near the country’s capital and warehouses near upcoming infrastructure projects to seize opportunities in the logistics industry.  

 

DOTr triples capex for rail infra to P278B 

NEWS

The Department of Transportation (DOTr) plans on increasing its capital expenditure to PHP278.3 billion (USD5.8 billion) in 2022 from PHP90.8 billion (USD1.9 billion) in 2021 due to the 11 upcoming railways projects. The projects include the PHP9.5 billion (USD197.9 million) LRT-2 East Extension, the PHP22 billion (USD458.3 million) MRT-3 rehabilitation, the PHP3 billion (USD62.5 million) MRT-LRT Common station, the PHP65 billion (USD1.4 billion) LRT-1 Cavite Extension, the PHP68.2 billion (USD1.4 billion) MRT-7, the PHP50 billion (USD1.0 billion) PNR Clark Phase 1, the PHP82 billion (USD1.7 billion) Mindanao Railway, and selected portions of the PHP357 billion (USD7.4 billion) Metro Manila Subway project. The MRT-3 rehabilitation will be completed by Q4 2021 while projects such as PNR Clark Phase 1, LRT-1 Cavite Extension, LRT-2 East Extension, and MRT-7 will likely be partially operational within the same year. In addition, phase one of the Mindanao Railway will likely be partially open in March 2022 while the tunnel boring for the Metro Manila Subway is scheduled in Q3 2021.


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RESEARCH VIEW

In 2021, the government has allocated PH87.9 billion (USD1.8 billion) for the Department of Transportation (DOTr) and about PHP695.7 billion (USD14.6 billion) for the Department of Public Works and Highways (DPWH). In our view, these will likely further stoke the demand for office spaces, residential condominiums once these public infrastructure projects are completed. Colliers believes that the expansion of the country’s railway network should unlock underutilized areas for township developments. Developers with significant office and condominium stock in Northern Metro Manila are likely to benefit from the completion of the MRT-7 project as it is connected to several developments in Quezon City and Bulacan. Colliers recommends that developers continue maximizing their projects’ proximity to infrastructure projects due to be completed in the next 12 to 36 months. Strategic landbanking in areas outside of Metro Manila should also be considered as the ramped-up infrastructure spending is likely to enable decentralization from urban areas to the provinces.

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Joey Bondoc

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