Philippines investment, 2019 outlook
Despite the recent downside risks of inflation in the Philippines, the International Monetary Fund (IMF) forecasts economic growth of 6.6% by 2019. Inflation forecasts, on the other hand, are projected to decline from 6.7% to 4%. The IMF cites lower pesos, higher consumption taxes and higher global oil prices as major inflation factors.
The World Bank is proactive in terms of sustainability and inclusiveness, including solid financial management of the Philippine government, tax reform, timely implementation of public investment programs, and President Rodrigo Duterte's "Build Build Build" plan. Expect growth.
Infrastructure investment has increased year-over-year, with 44 of 75 projects already underway. Known for his strong political will and solid leadership, President Duterte wants to urgently implement projects that are likely to attract investment.
Philippine investment environment
As of the end of 2017, the Philippines had the highest rate of progress in foreign direct investment (FDI) in ASEAN.
In the first half of 2018, FDI recorded 42% growth, gaining investor confidence, driven by sound fundamentals and growth prospects in the macro economy. According to the Philippine Statistics Authority (PSA), the total amount of foreign investment approved in the second quarter of the same year was 30.9 billion pesos (US $ 575.9 million), which was recorded in 2017 at 18.2 billion pesos (339.2 million). It was much higher than the US dollar).
Despite the decline in FDI in other countries worldwide, the influx of FDI in the Philippines continues to increase, indicating a favorable investment environment. Foreign business leaders are also very welcome to the Philippine government for initiatives such as simplifying procedures and establishing easy companies in the Philippines.
On October 29, 2018, President Duterte signed Executive Order No. 65 promulgating the 11th Regular Foreign Investment Negative List (FINL). This order has been amended to include five areas for 100% foreign investment participation.
The National Economic and Development Authority (NEDA) has announced the following investment areas and activities that currently allow 100% direct investment:
- Internet business other than mass media
- Higher education level guidance provided that it is not a vocational subject
- Engagement in training centers for short-term and advanced skill development
- Wellness Center excluded from item 4 of Listing B of FINL
Opening up to foreign investors and controlling the constraints on doing business is a priority of the Duterte government. President Duterte supports the importance of amending the 1987 Constitution to lift restrictions on foreign investment in order to reduce deficits and further liberalize business practices.
The transition to federalism also offers great prospects for improving the country's competitiveness by creating more employment opportunities.
Philippine economy
Information Technology-Internet Services
The Philippines has recently convened a third telecommunications carrier to end its two-company monopoly in the telecommunications industry and allow new players to enter.
The US Telecommunications Commission has approved Mislatel as the third major telecommunications player. The committee consists of China Telecom, China's state-owned telecommunications company, and Udenna Corp and Chelsea Logistics, owned by Davao-based Dennis Uy.
A third internet provider has long been sought after in the Philippines. Under Mr. Duterte, the Philippines will create an environment in which foreign capital can easily enter. Duterte's stance is that foreign investment in this area is needed to improve the telecommunications and electricity sectors and thus boost the economy. As the constitutional amendment progresses, more foreign investors will be able to compete for services.
The services sector grew the most this year at 6.9%, followed by the industrial sector at 6.2%. As of November 2018, the country's GDP growth rate is 6.1%.
Banking
According to Moody's investor report on the Philippine banking system, the Philippines maintains a positive Baa2 credit outlook. Moody predicts that stable credit growth will continue for the next 12-18 months, pointing out that it is improving cost-effectiveness.
On the other hand, the continuous rise in interest rates is seen as positive, affected by inflationary pressures and tax reforms. Banko Sentral ng Pilipinas (BSP), the country's central bank, plans to raise its borrowing rate by 150 basis points by the end of next year to address inflation.
As of June 2018, external debt was US $ 997 million, down 1.4% year-on-year. The BSP reports that a reduction in external debt minimizes foreign exchange risk.
Philippines investment, 2019 outlook
Declining poverty and a 94.6 percent labor force contribute to the Philippines' sustainable growth trajectory.
The population growth, estimated to reach 106.6 million, makes it an attractive country for foreign investment for young, well-educated and vibrant workers.
Infrastructure development on public spending will strengthen business and consumer spending. However, external factors will continue to pose uncertain risks to global financial markets.
According to a 2018 World Bank report, average inflation is projected to settle at 3 percent by 2019, within the BSP's target of 2-4 percent. The service sector is also expected to be a driving force for economic growth. (Zhorea Shara Garcia / ASEAN Briefing)
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