Philippine Market Review: Current indicators and outlook

published on June 29, 2018
 
For 2018, the growth rate of the Philippine Gross Domestic Product (GDP) may be expected to rather stay at the lower edge of the 7-8 percent range predicted by the government forecast:  Thanks to a continuous propensity to consume sustained by a constantly growing population, by increasing per capita income and high reverse transfers from Philippine employees working abroad, the Philippines will certainly maintain their position as one of Asia´s fastest growing economies in 2018.
 

 

• Import and export

• Investment

• Reforms

• Outlook

Import and export

The high consumer enthusiasm, as well as an increasing demand for capital goods sustained by state subsidized infrastructure projects worth 145 billion Euro, provide for a high import demand which is accompanied by a continuously and healthily growing Philippine export rate. Just like in the previous years, electronic products keep spearheading the list of most important commercial goods. Totaling approx. 30 billion US-Dollar, electronic products accounted for half of the Philippine export volume in 2017. Accompanied by the weak Philippine Peso and supported by a reinvigorated export demand, export sales may be expected to further increase by a double digit growth rate. 
 
At the same time, the high propensity to consume as well as the planned investments for 2018 will result in an increase in import needs. Given the lack in domestic supply, the Philippines will continue to largely depend on the import of foreign investment goods.
 

Investment

There is an urgent need for the above mentioned infrastructure investments in order to maintain and continue the dynamic economic growth. Existing shortages in transportation, water and energy supply need to be eliminated swiftly and sustainably. In order to successfully breathe life into the large variety of planned projects, the Philippine government does not only fall back on domestic contractors, but also refers to foreign support in financing and realization. German enterprises enjoy a particularly excellent reputation in the Philippines.  
 
Furthermore, the government is envisaging a considerable increase in public investment. For 2018, the volume of public infrastructure investments is supposed to amount to 5.4 percent of the GDP – a percentage which is supposed to further increase in the following years. In this context, the Philippine government aims at attracting more foreign investors. The soon expected 11th issue of the ”Foreign Investment Negative List” is supposed to further contribute to the successive liberalization of ownership restrictions for foreign entities. Numerous business areas have already been opened to a foreign ownership of up to 100 percent. Further liberalization measures may be expected to be shaped in favor of infrastructure related industries. There are quite some additional sectors though which are also expected to benefit from an enhanced liberalization, like e.g. retail, education, professional practice and utility companies.
 
Incentives for investment will be preferentially granted to foreign as well as to domestic enterprises in the fields of manufacturing, agriculture and outsourcing. The Philippine government is about though to overall revise its incentive models.
 

Reforms

In order to strengthen the country´s economic power and to substantiate the reform potential of the new government, one of the most comprehensive personal income tax reform packages in decades has been enacted lately. Further tax reforms in the field of company taxation are about to follow.
 

Outlook

Even though the Philippines are currently tormented by political, social and economic challenges, we should neither lose sight of the long-term dynamic development realized throughout the past years nor of the quite promising perspectives. This rather positive overall assessment is reinforced by the GPCCI World Business Outlook spring edition, stating a peak value of 71 percent of companies domiciled in the Philippines to expect the economic development of 2018 to outperform last year´s figures, resulting in a majority of these companies planning on increasing their investment in the Philippines.
 
Figures: GTAI