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Market Intelligence | Philippines May 26, 2022

Foreign direct investments, FDI, Bangko Sentral ng Pilipinas, GDP forecasts

This week, Colliers Research provides insights on foreign direct investments reaching USD893 million (PHP46.4 billion) in February 2022, up 46% from USD611 million (PHP31.8 billion) a year earlier; and UK-based think tanks revising their economic growth projections for the Philippines this year.

FDI inflow rebounds by 46% in February

SUMMARY

Data from the Bangko Sentral ng Pilipinas (BSP) reveal that net foreign direct investments (FDI) reached USD893 million (PHP46.4 billion) in February 2022 from USD611 million (PHP31.8 billion) posted in February last year. Total FDIs from January to February grew by 8% to USD1.7 billion (PHP88.9 billion) from USD1.6 billion (PHP82.2 billion) in the same period last year. The central bank projects FDIs to reach USD11 billion (PHP527 billion) this year and USD11.8 billion (PHP613.6 billion) in 2023. In 2021, FDIs reached a record-high USD10.5 billion (PHP546 billion) from USD6.8 billion (PHP353.6 billion) in 2020. The central bank noted that the increase in FDIs “reflected mainly the continued infusion of funds by non-resident direct investors to their local subsidiaries.”

RESEARCH VIEW

Major economies are starting to reopen and the Philippines should prepare for greater FDI inflows. Colliers believes that the enactment of pro-business measures will play an important role in helping the country attract more investments and in supporting the government’s thrust of generating more jobs. The 8.3% economic growth in Q1 2022 signals the start of the country’s economic resurgence with the Philippines being the fastest growing East Asian economy during the period. This should support the growth of key economic sectors, including real estate. In our view, greater inflows that will be funneled into the property sector will influence improved absorption of retail and office space. The creation of more jobs should boost consumer confidence and this will also have a positive effect on residential sales in both primary and secondary markets. Meanwhile, the Philippines continues to attract more manufacturing investments and this should support a sustained take-up of warehouses and industrial lots across the country’s major industrial zones.

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Think tanks hike ’22 PH GDP forecasts, but see inflation storm clouds
   

SUMMARY

UK-based think tanks have revised their economic growth projections for the Philippines this year. Pantheon Macroeconomics raised its 2022 GDP growth projection for the Philippines to 5.6% from 4.5% previously. Meanwhile, Capital Economics said the Philippine economy is likely to expand by 8.5% from an earlier forecast of 7.5%. Capital Economics warned that elevated inflation could weaken the Philippines’ recovery prospects.

RESEARCH VIEW

The Philippine economy’s stellar growth in Q1 2022 bodes well for the property market. Household spending continues to drive the country’s GDP, although this is threatened by rising prices of basic commodities. Relaxed mobility restrictions have resulted in greater consumer traffic in malls. This, along with improving business and consumer confidence, should stoke the retail market for the remainder of 2022. In our view, this should have a positive impact on physical mall space take-up and this should play a role in the recovery of mall lease rates starting H2 2022. Other property segments such as office and residential are also likely to benefit from further relaxation of mobility restrictions. Landlords are likely to benefit from return-to-office initiatives of various companies. Residential rents and prices, meanwhile, are likely to recover as more foreign employees return to the Philippines and locals start to rent condominium units near their offices in key business districts across Metro Manila.

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