Private construction still faces issues

National Economic Development Authority (NEDA) Secretary Arsenio Balisacan said on Friday that the country's private construction industry had not yet fully recovered after the pandemic, with investors pointing to right-of-way issues and the high cost of electricity as the biggest reasons for holding out.

"Construction has not yet fully recovered since the Covid-19 pandemic struck with the share of private construction declining relative to public construction. We need to substantially improve the investment climate for the private sector," Balisacan said during the Build Better More Infrastructure Forum held at New Clark City in Tarlac.

The socioeconomic planning chief attributed the slowdown to several factors.

"First, we expected some investor hesitation owing to initial policy uncertainty brought about by the elections in 2022. On the other hand, lingering and persistent inflation, and a challenging external environment, particularly a strong dollar in the past two years, led to the elevated interest rates we see today," he said, adding they will continue to invite foreign investors in the infrastructure.

Other factors are right-of-way issues when acquiring private lands for public use, the high cost of electricity and the ease of doing business.

It is for this reason Balisacan is pushing for Congress to pass the Right-of-Way bill into law to ensure infrastructure products are completed on time with an emphasis on the provision concerning the valuation of property, seen as a game changer in resolving conflicts between the government and private owners.

"We have gone back to Congress regarding the Right-of-Way law and through the Ledac (Legislative Executive Development Advisory Council) they agreed to pass that law within the remaining term of this administration. So with that, I think many of the problems we are encountering in the quick implementation of infrastructure projects will be resolved," he said.

The NEDA chief expressed confidence that by 2025, private construction would spike back to its pre-Covid numbers, if not more.

"But with public investments coming in strongly, that will be the signal for the private sector to come in, too, especially that regional and global community investment climate is improving, notwithstanding these geopolitical tensions, because that's another factor that can matter," Balisacan said.

Source: Manila Times

PHL on track to reach upper middle-income status

The Philippines is still on track to become an upper middle-income economy next year as long as the growth momentum continues, National Economic and Development Authority (NEDA) Secretary Arsenio M. Balisacan said.

“If growth this year is not dampened, [we] should be on track,” he told reporters on the sidelines of the BusinessWorld Economic Forum on Wednesday.

The administration of President Ferdinand R. Marcos, Jr. has set a target for the Philippines to reach upper middle-income status by 2025. An upper middle-income country means having a gross national income (GNI) per capita income range of $4,466 to $13,845.

The World Bank currently classifies the Philippines as a lower middle-income country with a GNI per capita of $3,950.

Mr. Balisacan said gross domestic product (GDP) growth must average 6.1% in the next three quarters to hit the government’s 6-7% growth target.

The Philippine economy expanded by 5.7% in the first quarter, slightly faster than 5.5% in the previous quarter.

“There are still three quarters out there. The good thing is inflation is manageable now. Even though we expected worse for the April [print,] it turned out better than expected. So, we hope that will continue,” Mr. Balisacan said. 

Inflation accelerated for a third straight month to 3.8% in April from 3.7% in March. Inflation averaged 3.4% in the January-April period, below the central bank’s 3.8% full-year forecast.

In the coming months, NEDA expects economic growth to be favorable as the Bangko Sentral ng Pilipinas (BSP) was “less hawkish” in its last policy meeting and has signaled a possible rate cut in August.

“If the BSP is not going to raise any further the interest rate, and in fact, the governor has indicated that they might start loosening, so that will improve expectations, and expectation drives consumption,” Mr. Balisacan told reporters.   

Last week, the Monetary Board kept its target reverse repurchase rate unchanged at a 17-year high of 6.5%.

The waning El Niño dry pattern and expected easing of rice prices may also improve the country’s GDP growth prospects, according to the NEDA chief.

“Since El Niño is tapering, we expect that world prices for commodities, including rice, are expected to moderate and start falling, especially for rice,” Mr. Balisacan said.

Rice inflation, which contributes nearly half to the overall inflation print, accelerated by 23.9% in April. However, this was slower than 24.4% in the previous month.

Security Bank Corp. Chief Economist Robert Dan J. Roces said that achieving upper middle-income status “is not just about hitting a specific threshold, but about building an equitable economy.”

“While the Philippines has made significant progress in recent years, driven by factors such as a young population, a thriving services sector, and increasing foreign investments, it is also crucial that the benefits of economic growth are more evenly distributed,” Mr. Roces said.

To increase its GNI per capita, the country must also ensure competitiveness across all sectors, address infrastructure gaps and challenges, and improve governance in all institutions, Mr. Roces said.

Since 1987, the Philippines has been classified as a lower middle-income economy, according to the World Bank’s earliest records.

“While the Philippines has strong growth prospects that suggest it could reach upper middle-income status in a few years, several challenges — like a potential global economic slowdown, infrastructure and education deficits, and the impact of natural disasters — could impede this goal,” Jonathan L. Ravelas, senior adviser at professional service firm Reyes Tacandong & Co., said.

The World Bank forecasts that the Philippines would be the fastest-growing economy in Southeast Asia this year with a 5.8% growth estimate.

For 2025, the multilateral lender hiked its growth forecast for the Philippines to 5.9% from 5.8%.

However, the World Bank’s growth forecasts for the Philippines still fall behind the government’s 6-7% target band.

Mr. Balisacan cited the need to “diversify” the country’s growth sources to ensure inclusive and sustainable economic expansion.

“So, what are the growth drivers? We are pushing on all fronts. Opportunities across the entire economy abound in enabling public infrastructure such as energy, water, and physical and digital connectivity, as well as social infrastructure such as schools, healthcare facilities, and housing,” he said.

The government is also looking to expand growth outside the National Capital Region (NCR), he added.

Source: Business World

15 PPP projects up for approval this year

Around 15 public-private partnership (PPP) projects are expected to be submitted to the National Economic and Development Authority (NEDA) Board for approval this year, according to the PPP Center.

Speaking at the SGV Knowledge Institute’s Philippine Economic Outlook forum, PPP Center executive director Cynthia Hernandez said there are 117 PPP projects in the pipeline worth P2.5 trillion as of February.

“Out of the 117 projects, there are 15 that are expected to be approved this year,” she said.

Hernandez told reporters the 15 projects would be submitted to the NEDA Board chaired by President Marcos for approval.

Those in the advanced stages are the Metro Manila Subway operations and maintenance (O&M), North-South Commuter Rail O&M, construction and O&M of the San Ramon Newport at the Zamboanga City Special Economic Zone, University of the Philippines Philippine General Hospital Diliman, Cagayan Valley Medical Center – Hemodialysis Center and the National Capital Region EDSA Busway O&M.

Also part of the PPP pipeline to be submitted for approval this year are solicited projects, including the Cebu Bus Rapid Transit, Davao City Bypass project, Metro Rail Transit Line 3, as well as Light Rail Transit Line 2.

Meanwhile, unsolicited projects expected to be submitted for government approval this year are the Puerto Princesa International Airport rehabilitation and O&M, New Bohol International Airport upgrade and O&M, Iloilo International Airport rehab and O&M, long term water source development for Metro Manila, and Philippine Identification System O&M.

According to Hernandez, the government wants to start the procurement process for the O&M projects relatively early for proper turnover and operations.

“This will reduce interface risk. The government really doesn’t have the capacity to operate the projects when they finish,” she said.

For 2025, Hernandez said 13 projects in the early stages of development would also be submitted for approval.

“The preliminary studies are expected to be completed. Once completed, these can be submitted by the implementing agencies for approval by 2025,” she said.

With the enactment of the new PPP Code, which aims to provide a more competitive and enabling environment for the implementation of projects undertaken with the private sector, Hernandez said the government expects to receive more unsolicited proposals.

As PPPs are being pushed for the implementation of infrastructure projects, she said the PPP Center is encouraging Japanese firms to be more involved in PPPs through direct investments.

Source: Philstar