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Manila Market Intelligence: March 12, 2021

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FDI inflows slump to lowest in 5 years

NEWS

FDI inflows dropped by 24.6% to USD6.54 billion (PHP317 billion) from USD8.67 billion (PHP421 billion) in 2019. The figure is the lowest since the USD5.6 billion (PHP271 billion) posted in 2015. Data from the central bank show that bulk of investments came from Japan, Netherlands, United States, and Singapore. These funds were funneled into the manufacturing, property development, and financial and insurance sectors. The central bank is projecting FDIs to grow by 15% to USD7.5 billion (PHP363 billion) in 2021. Some analysts believe that the enactment of the CREATE (Corporate Recovery and Tax Incentives for Enterprises) bill will partly help in boosting FDI inflows.

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RESEARCH VIEW

The property development sector continues to capture a good portion of annual FDIs received by the Philippines. Colliers believes that fostering a conducive business environment which includes the passage of tax reform measures plays a crucial role in enticing foreign developers to invest in the country. Other measures such as the Public Services Act, Retail Trade Liberalization and the Foreign Investments Act should also be implemented to ensure that the Philippines remains on the investment radar of foreign businessmen. In our view, the continued inflow of foreign investments is likely to support office, residential and industrial segments post-pandemic.


Business groups vow support to e-commerce growth plan

NEWS

Business groups Philippine Chamber of Commerce and Industry (PCCI), Philippine Franchise Association (PFA) and the Philippine Retailers Association (PRA) are supporting the Department of Trade and Industry’s (DTI) goal of expanding e-commerce in the Philippines. Based on the government’s roadmap, the objective is to raise the share of e-commerce to the country’s gross domestic product (GDP) to 5.5% next year from 3.4% in 2020. The roadmap also intends to raise the number of e-commerce enterprises to one million in 2022 from 500,000 in 2020.

 

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RESEARCH VIEW

Colliers believes that the emergence of a lockdown economy has raised the utilization of e-commerce platforms. As the central bank noted, raising the share of digital payments to total retail transactions to 50% by 2023 from 20% in 2018 should help in the country’s economic rebound. In our view, internet infrastructure should be improved to further encourage the use of mobile payment schemes. Colliers encourages retailers to create their own e-commerce sites to capture thriving demand in the market.


Despite lockdowns, repatriations, threats to health: 2020 remittance flows buck outlook

 

NEWS

Data from the Bangko Sentral ng Pilipinas (BSP) or central bank show that Overseas Filipino Worker (OFW) remittances reached USD29.9 billion (PHP1.43 trillion) in 2020, down 0.8% from USD30.1 billion (PHP1.44 trillion) in 2019. The figure is better compared to the 2% contraction initially forecasted by the central bank. December 2020 cash remittances declined by 0.4% to USD2.89 billion (PHP138.7 billion) from USD2.9 billion (PHP139.2 billion) in the same period of 2019. Central bank Governor Benjamin Diokno said that 2020 remittances accounted for 9.2% of the country’s GDP, slightly lower than the 9.3% share posted in 2019. Meanwhile, the drop in remittances in 2020 was also the first decline since 2000, which was brought about by the Asian Financial Crisis.

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RESEARCH VIEW

Initially, analysts projected a 10-20% or a USD3-6 billion drop in remittances. The 2020 dta show that Filipinos continue to send in money to the country and these remittances fuel household spending. Anecdotally, Colliers has observed that OFWS partially drive the demand for affordable to mid-income (PHP1.7 million to PHP6 million) condominiums. In 2020, these price segments accounted for 57% of total take-up of pre-selling condominiums in Metro Manila. Colliers recommends that developers continue launching more affordable to mid-income developments to capture a wider range of the market demand. Developers should also eye viable fringe areas that are ripe for construction and have shown strong condominium pre-sales including the Caloocan-Malabon-Navotas-Valenzuela (CAMANAVA) corridor, Pasig, Quezon City North, and Manila South. These areas accounted for 47% of aggregate take-up for affordable-to-mid-income projects in 2020.

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Joey Bondoc

Associate Director

Research

Manila

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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