Philippine economy wrap: Sept 1-7

What you need to know about the Philippine economy last week


The past week was another euphoric one for the Philippines, highlighted by the release of the World Economic Forum’s Global Competitiveness Index where we jumped 6 places to 59th.

This came on the heels of the previous week’s announcement of most-watched economic indicator — the GDP. A 7.5% growth in the second quarter was higher than expected and was welcomed with glee. The stock market inched up for a few (then slid down again), and global banks adjusted upwards their Philippine growth projections.

Confidence in the Philippine economy was supported by other indicators released during the week. Gross international reserves reached US$83.2 billion as of end-August. Central bank officials love to cite this stockpile of foreign exchange reserves, which was $29 billion more than July’s, to prove we can weather external shocks. It can cover 12 months-worth of imports of fuel and commodities if ever shocks cause dollar shortages.

Also supporting the growth goal of over 7% growth in the coming quarters is the financial system that’s awash with cash. Banks were P6 trillion-liquid in July, reflecting a money supply growth of 30.1%.

Amid the weak recovery of the global economy (according to G20), and while portfolio funds are still be flowing out of the emerging markets and back to the US, we’re still a good story. Unlike neighbors Indonesia and India, our inflation stayed low — at 2.1% in August. We’re growing, awash with cash, and there’s no threat of overheating.

Stability was one of the reasons conglomerates have been expanding out of imperial Manila. The multi-billion provincial projects of retail and/or real estate giants SM, Ayala, Robinsons, Puregold, Vista Land, Megaworld and others have been fueling the sales of fast moving consumer goods (FMCG) and loans to property buyers.

A consumer behavior study of Kantar Worldpanel showed rural households are buying more than their urban counterparts.

Infrastructure updates

While consumption has always been a major economic driver, the Aquino government has also marketed infrastructure as another. But these big-ticket projects have become big-time headaches.
Frustration has been high and patience stretched galore among those in the private sector hit by the project bidding delays. Foreign investors are wondering if they priced in infrastructure investments too early given the delays.

Classic example: The Ayala group said they have only completed 30% of the 4-kilometer Daang Hari-SLEx road project since they won the first PPP project way back in 2011. They have to deal with 2 or 3 more agencies, each with different requirements and issues, including the protest of the Villar group’s property firm, which want to put up a mall in a nearby area that Ayala said was already assigned to them.

A new maintenance firm is now in-charge of MRT-3, the rail system carrying over half a million passengers a day. A day after APT Global took over the one-year project, the system broke down, inconveniencing hundreds of commuters. This proved once again that lessons from packaging a PPP project with a financial and ownership matrix as complicated as MRT-3’s must be done right from the very start. Unwinding and recalibrating is no joke.

How the transportation department is heeding these lessons are on display with how it’s proceeding with the P60 billion — este, P30 billion — LRT-1 Cavite rail extension project. After the bidders withdrew, the government now wants to dangle a carrot: It is proposing to shoulder the project’s P2-billion property tax.

There goes the 2010 State Of the Nation promise that the government will not spend a single cent for big ticket infrastructure projects. 

Hello, Europe

On the other side of the world, aviation officials shared a good news: the governments of the Philippines and Italy signed the first air deal after the European Union lifted the safety ban on our local airlines. The two agreed that each country’s commercial airlines can soon mount 14-a-week direct flights.

We need more of these favorable bilateral deals to boost our tourist arrivals. There are more foreigners visiting, but numbers so far show tourist arrivals growth are barely making the goal.

Routes to North Asia have long been eyed by local airlines. These tourist-rich destinations are currently underserved. We’re working on expanding current limits between points in the Philippines, and Japan and Korea.

Telco mega-deals

Telecoms dominated the deals news last week. Beleaguered Finnish mobile phone maker Nokia announced the sale of its mobile phone unit to US giant Microsoft for $7.17 billion.

US telecoms giant Verizon and British firm Vodafone entered into a blockbuster deal. Their $130 billion mega deal is set to be one of the biggest transactions in corporate history.

Globe Telecom and Bayan Telecommunications got clearance for their debt-to-equity conversion deal, allowing the Ayala-led industry second-liner to control about 57% of Lopez’s debt-laden telco unit. –



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