Today, the entire Filipino nation will exercise the right of suffrage — the much anticipated midterm and local elections, marking the start of the second half of the current administration. This momentous event coincides with the recent good economic news that has come the way of the Philippines.
The Philippines posted impressive GDP growth of 6.6% in 2012 and is expected to post a continued growth streak in 1Q13, as two of the pillars of economic growth — remittances from overseas Filipinos and tourist arrivals — posted strong growth in the first few months of the year. Remittances from overseas Filipinos grew by 6% y-o-y to USD 1.682 billion in February 2013 from USD 1.587 billion in the same period in 2012. Tourist arrivals for the first three months of 2013 reached 1.27 million, a growth of 10.76% from the 1.15 million tourist arrivals during the same period in 2012.
Just last week, the Philippines achieved its second investment rating upgrade from Standard & Poors, the result of continuing improvement in the economy, manifested in stable consumer prices, a better fiscal position and a strong external balance sheet. This came after the investment rating upgrade by Fitch Ratings in late March 2013, which highlighted the resilience of the economy amidst a weak global economy, improvements in fiscal management and a strong policy-making framework.
These investment rating upgrades are expected to improve the flow of investment into the Philippines in the medium- to long-term. One of the sectors of the economy that could clearly benefit from the potential surge in investments is the real estate sector. The investment rating upgrade could potentially boost the confidence of investors in various property products and investments because of stable market conditions and property yields.
While the potential increase in the level of investments in the property sector will also likely increase the level of risk due to speculative foreign investors, the government, through the Bangko Sentral ng Pilipinas (BSP), has implemented new measures to ward off short-term investments and speculators in the property sector. The BSP is set to refine its existing regulations to include stricter provisions to limit the loans extended by banks to the property sector, including housing loans granted to individuals, credits extended to property developers and holdings of securities issued by real estate firms.
These two coinciding events — improvement in the investment rating and the local and midterm local elections — show the level of maturity of some of the country’s institutions. As the relevant institutions continuously adapt to the highly dynamic economy, the fruits of the investment rating upgrades and the credible results of the election will project even stronger confidence in the market.
About the author
Claro Cordero Jr is the Head of Research, Consulting & Valuation Advisory Services for Jones Lang LaSalle in the Philippines.