BMI forecasts 6.3% growth for PHL in 2025

Further monetary easing is seen to prop up gross domestic product (GDP) growth in the Philippines, Fitch Solutions’ unit BMI said, as this would provide much-needed support to domestic demand.

“For the Philippines, we are expecting growth to accelerate from 5.8% in 2024 to 6.3% in 2025. The main driver is monetary policy loosening,” BMI Asia Country Risk Analyst Shi Cheng Low said in a webinar on Tuesday.

The government is targeting 6-8% GDP growth this year.

For the first nine months of 2024, growth averaged 5.8%. Preliminary fourth-quarter and full-year GDP data will be released on Jan. 30.

“Keep in mind that investment has been quite weak in the first quarter and third quarter. So about 150 basis points (bps) of cuts by the end of 2025 should help boost the Philippine economy going forward,” he added.

The Bangko Sentral ng Pilipinas (BSP) began its easing cycle in August last year, delivering 75 bps worth of cuts for 2024.

The central bank has signaled further easing this year as the current policy rate at 5.75% is still in “restrictive territory,” BSP Governor Eli M. Remolona, Jr. said.

Mr. Low said another growth driver is the rebound in private consumption as inflation continues to ease.

Headline inflation averaged 3.2% in 2024, within the 2-4% central bank target.

“We expect inflation to stay within the target for the rest of the year, obviously barring external shocks and also because the labor market has actually been improving,” he said.

This year, the BSP expects inflation to average 3.3%.

However, Mr. Low said their growth forecast for this year hinges on the expectation that US President-elect Donald J. Trump would not be aggressive in the implementation of his tariff proposals.   

“If that’s the case, we are going to lower our projections downwards. And I think that’s the biggest risk for the Philippines because the US is one of [its] biggest trading partners,” he said.

Mr. Trump, who is set to assume the presidency on Jan. 20, has pledged to impose import tariffs of up to 10% across the globe and 60% for Chinese goods.

“In sum, we expect the growth outlook to improve at least for the Philippines over the coming quarters,” Mr. Low added.

SERVICE BOOST

Meanwhile, HSBC in a separate commentary said the Philippines is expected to be one of the fastest-growing economies in Southeast Asia, mainly driven by a boost in services.

HSBC Global Private Banking and Wealth Chief Investment Officer for Southeast Asia and India James Cheo said the Philippine economy is “expected to deliver one of the strongest growths in the region this year.”

HSBC expects the Philippines’ GDP to expand by 6.3% this year and 6.7% in 2026.

“Philippine economic growth in 2025 will be driven by robust domestic consumption, a thriving business process outsourcing (BPO) sector, and increasing investments in digital services.”

“The country’s unique strength in service exports, including IT and BPO services, provides a buffer against global trade uncertainties and tariff risks.”

Data from the BSP showed the Philippines booked $37.4 billion worth of services exports in the first nine months, up 6.25% from a year earlier.

“Service exports and overseas remittances, which remain key economic pillars, will continue to contribute significantly to economic resilience and stability in the Philippines,” Mr. Cheo said.

He also said the country’s monetary and fiscal policies are “aligned to support growth while managing risks.”

Mr. Cheo said the central bank would likely deliver further rate cuts this year.

“We forecast the BSP to cut the policy rate to 5% in the third quarter of 2025, as it cautiously navigates external risks like potential volatility in the peso and the US Federal Reserve’s easing cycle.”

“On the fiscal side, the government’s infrastructure agenda remains a key growth driver, supported by revenue-enhancing measures,” he added.

Meanwhile, HSBC expects the peso to “face volatility from a stronger dollar but its high carry will be a buffer.”

“We are bullish on the peso and expect it to stay resilient at P59.8 against the US dollar by end-2025.”

The peso closed at P58.62 a dollar on Tuesday, strengthening by eight centavos from its P58.70 finish on Monday. Last year, the peso fell to a record-low P59-a-dollar level thrice.

MONETARY POLICY BUFFER

Meanwhile, Bank of America (BofA) Global Research in a separate report said economies in Southeast Asia might need to deploy varying policies to cushion the spillovers from Mr. Trump’s tariff plans.

“If trade shocks materialize, we reckon that the fiscal-monetary policy mix to cushion any softening of external demand may differ across countries,” it said.

“We think that policy mix may be more balanced in the case of Malaysia and Singapore, more skewed towards fiscal policies for Indonesia and Vietnam, and more skewed towards monetary policies for the Philippines and Thailand.”

For the Philippines, BofA said monetary policy “may have to play a greater role.”

“Inflation is at more manageable levels after the reduction of rice import duties in mid-2024, and BSP is less sensitive to FX (foreign exchange) movements compared with Bank Indonesia,” it said.

“As such, BSP could pursue deeper policy rate and RRR cuts. On the other hand, the government has less scope to raise spending significantly, with the fiscal deficit target for 2025 already above 5% of GDP and government debt at record high levels.”

Source: Business World

Property market opportunities in 2025

The Philippine economy continues to enjoy stellar growth, and Colliers see this providing opportunities for the real estate sector, especially in the retail, residential, and industrial segments.

These are the property sub-segments likely to benefit from interest rate cuts recently implemented by the central bank. The Philippines’ young and skilled workforce with constantly rising disposable incomes also support these sub-segments’ growth beyond 2025.

RETAIL: MORE EXPERIENTIAL, LESS TRANSACTIONAL

The retail sector has exhibited resilience over the past 12 months with Philippine malls attracting greater interest from foreign retailers. Some mall developers have even reported that consumer traffic is even greater than pre-pandemic level and this presents tremendous opportunities for retailers and consumers alike.

There will be a focus on experiential retail and special products and services. Even luxury is facing ‘fatigue’ at the moment, and we project that brands that will do well are those that offer unique curation and offering.

We are now seeing the impact of Retail Trade Liberalization Law on physical mall space absorption. With rising interest on the Philippine retail landscape, Colliers expects the entry of more anchor tenants particularly in major regional and super-regional malls across the capital region.

The Philippine economy is primarily consumption-driven, and this entices foreign retailers to invest in the country. Foreign players are now more aggressive in taking up physical mall space.

Mall operators are also implementing shifts to suburbia even in the retail sector, resulting in more retail centers outside of the capital region. Among the malls undergoing redevelopment and are scheduled to open outside Metro Manila include the Filinvest Mimosa Mall in Pampanga, Power Plant Malls in Bacolod and Pampanga by Rockwell Land, Megaworld’s The Upper East Mall in Bacolod, Ayala Malls Abreeza expansion, and the redevelopment of Ayala Center Cebu and Robinsons Bacolod.

Colliers sees the expansion of foreign retailers including those from the home furnishing segment. We believe that the eventual take-up of the sizable number of ready-for-occupancy (RFO) units in Metro Manila will likely support the demand for furniture and home accessories.

RESIDENTIAL: KNOW YOUR DEMAND, BEFORE YOU EXPAND

Tempered new launches in the capital region would mean tempered take-up particularly for condominiums in Metro Manila given the sizeable number of unsold pre-selling and completed/RFO units right now that could take more than five years to absorb given the current take-up rates.

Colliers believes that the substantial number of unsold RFO units is constricting developers to launch new condominium projects in the capital region. As of Q3 2024, Colliers data showed that unsold inventory in Metro Manila (covering pre-selling and RFO) reached 75,300 units. It will take about 5.8 years to fully sell out all these unsold condominium units, about five times longer compared to the pre-pandemic period (2017 to 2019) where remaining inventory life (RIL) ranged between 0.9 and 1.1 years.

Of the 75,300 remaining inventory, 27,200 are RFO valued at P154.4 billion ($2.8 billion).  This is a sizable amount yet to be taken up.

The lower to upper mid-income segments (P3.6 million to P12 million) accounted for 57% of remaining RFO inventory in Metro Manila as of Q3 2024. Meanwhile, among the submarkets with high level of unsold RFO units include Pasig City, QC-South, Parañaque, Manila North, Makati Fringe, and QC-North.

Developers are likely to continue the shift to suburbia with lots-only and house-and-lot (H&L) projects outside of Metro Manila and in key areas outside NCR (AONCR).

Horizontal projects remain attractive. We encourage developers to consider the viable locations for H&L and lot-only projects including provinces in Calabarzon, Central Luzon, Central Visayas, Western Visayas, and Davao region. H&L projects in these property hotspots recorded an average annual price increase of 4% to 7% from 2016 to 2023. Lot-only developments, meanwhile, recorded stronger price appreciation during the period, ranging between 7% and 15% annually from 2016 to 2023.

Colliers sees greater focus on leisure developments but unlike the property cycle in the mid 1990’s, the development is more holistic, and masterplanned with various land uses.

Colliers data showed that these projects were already popular pre-Covid but the pandemic only highlighted the strong take-up for these leisure-centric residential enclaves. Some of these leisure-oriented projects are dispersed across Batangas, Cavite and Cebu. Other locations likely to attract similar investments include Palawan, Boracay, Bohol, and Davao. The demand for these projects should also get a boost from the recovery of the country’s travel and tourism sector. Colliers also sees the revival of demand for golf communities within and outside Metro Manila.

INDUSTRIAL: HOT ON COLD STORAGE

The industrial sector stands to benefit from the government’s push to promote the country as a manufacturing hub in the ASEAN region. Colliers sees semiconductors, food and beverage (F&B) manufacturers as well as sunshine industries including electric vehicles (EVs) likely propelling industrial space absorption across the country.

We encourage industrial players to incorporate technological innovation into their warehouses and work with the government and other stakeholders in upskilling manufacturing workforce and ease the process of registering businesses to send a signal to foreign industrial locators that the Philippines is open for business.

Colliers also projects the cold chain sector likely sustaining demand for industrial and warehouse assets. We see this subsegment thriving even post-pandemic. The Cold Chain Association of the Philippines (CCAP) expects the sustained expansion of country’s cold storage capacity. This should entice more foreign locators to invest in the country’s cold chain segment.

The opportunities for Philippine property are boundless. We should aim to thrive in 2025.

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Source: Business World

PHL builders to deliver strong results in 2025

Listed Philippine construction companies are expected to deliver strong results in 2025 — an election year — driven by increased state infrastructure spending, analysts said.

“[Construction companies] are set for growth due to the country’s favorable demographics, as well as preparations for the May 2025 midterm elections especially before the election ban,” Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., said.

He said infrastructure projects are expected to be expedited before the Commission on Elections (Comelec) enforces a public works ban before the May 2025 elections.

He added that the expected rate cuts by the US Federal Reserve are expected to increase demand for loans from property developers and construction companies.

“Increased government infrastructure spending would benefit construction companies that are part of the supply chain of the various infrastructure projects around the country,” Mr. Ricafort said.

State infrastructure spending rose 2.52% in October from a year earlier, according to data from the Department of Budget and Management.

“Overall, the profitability outlook for 2025 appears cautiously optimistic, contingent on favorable economic policies and the execution of planned projects,” Toby Allan C. Arce, head of sales trading at Globalinks Securities and Stocks, Inc., said in a Viber message.

He said the profitability of construction and infrastructure companies in 2025 depend on factors such as government infrastructure spending, private sector projects and macroeconomic conditions.

“The Philippine government’s ongoing infrastructure development through different initiatives can stimulate demand for construction services,” he added.

But the growth of the sector is expected to be underpinned by raw material costs including steel and cement, which are influenced by global markets and foreign exchange volatility.

Megawide Construction Corp. returned to profit in the third quarter, posting an attributable net income of P142.7 million from a net loss of P29.85 million a year earlier. Revenue rose 10.9% to P5 billion.

EEI Corp. had an attributable net loss of P31.75 million in the third quarter from an attributable net income of P406 million a year earlier as gross revenue fell 27.8% to P3.14 billion.

Phinma Corp., which has a construction material unit, posted an attributable net income of P144.86 million in the third quarter, 75.1% lower than a year earlier, even as revenue rose 0.5% to P6.61 billion. Gross expense increased by 2.4% to P5.5 billion.

Source: Business World