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Market Intelligence | Philippines June 6, 2022

Regional Comprehensive Economic Partnership, Business climate, Economic growth, GDP, DTI

This week, Colliers Research provides insights on the renewed call for the approval of the Regional Comprehensive Economic Partnership (RCEP) agreement, which is expected to improve the country’s investment climate; and Barcelona-based think tank FocusEconomics projecting a faster economic growth for the Philippines in 2022, driven by a higher-than-expected first quarter growth.

DTI, foreign biz groups renew call for RCEP OK

SUMMARY

The Department of Trade and Industry (DTI) and foreign business groups have renewed the call for the approval of the Regional Comprehensive Economic Partnership (RCEP) agreement. RCEP represents 30% of global gross domestic product (GDP) and would create the world’s largest free trade area. Trade secretary Ramon Lopez said it is important for the Philippines to join RCEP. Meanwhile, the Joint Foreign Chambers (JFC) said the RCEP approval will support the implementation of pro-investment measures such as the amendments to the Public Service Act, Retail Trade Liberalization Act, and Foreign Investments Act.

RESEARCH VIEW

Data from the DTI show that participation in the RCEP agreement can improve the Philippines’ trade balance by USD51.7 million (PHP2.7 billion), contribute to a 0.8% growth in GDP, and lower poverty incidence by 4.9% by 2030. Colliers believes that the approval of the RCEP deal in the Philippines should also improve the country’s investment climate. According to the JFC, the ratification of RCEP can potentially raise foreign investments from different regions, including North America, Australia, and Europe. RCEP should also complement other economic stimulus measures, including Public Service Act, Retail Trade Liberalization Act, and Foreign Investments Act. In our view, the implementation of these economic reforms should allow the entry of more foreign businesses to the country, which will likely contribute to greater office and retail space absorption.

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Think tank upgrades GDP growth forecast

SUMMARY

Barcelona-based FocusEconomics is projecting a faster economic growth for the Philippines in 2022. The think tank now expects the Philippine economy to expand by 6.7% from 6.5% after a faster-than-expected growth in Q1 2022. It added that private spending is likely to be supported by the relaxation of mobility restrictions. FocusEconomics warned that consumer demand is likely to be clipped by rising inflation and pre-election spending ban.

RESEARCH VIEW

The Philippine economy grew by a faster-than-expected 8.3% in Q1 2022, from a 3.8% contraction in Q1 2021. The improvement in economic output can be attributed to the increase in household spending, which accounted for about 75% of the country’s GDP in Q1 2022. Data from Philippine Statistics Authority (PSA) show that consumer spending grew by 10.1% in Q1 2022, up from a 4.8% contraction in a year ago. Aside from renewed consumer confidence, Colliers also sees optimism in the improvement of business sentiment. Data from Bangko Sentral ng Pilipinas (BSP) reveal that business outlook in Metro Manila improved to 35.7% in Q1 2022 from 20.1% in Q1 2021. In our opinion, the improvement in consumer confidence and personal expenditure should support rebound in the retail sector. On the other hand, the improvement in business confidence should partly support office space absorption as occupiers execute their expansion plans. This should also help raise the demand for residential units in major business hubs as more firms implement return-to-office.

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