Article

Improving investment fundamentals

December 19, 2011 / By

The investment climate for the Philippines has been exhibiting improving fundamentals over the last few months. The improvement in investment conditions has benefited the local property sector as foreign and local businesses become increasingly confident in injecting funds into the system in order to sustain growing demand for office space, residential condominiums and hotel developments.

Recently, Standard & Poor’s raised the outlook on the Philippines’ sovereign debt from “stable” to “positive”, thereby boosting the country’s chances of getting a credit rating upgrade next year. The Philippines also ranked six places higher in the Global Financial Development Index 2011 released by the World Economic Forum (WEF) last week. The index, which ranks 60 countries, measures and analyses the factors affecting the financial system and the development of the capital market. These recognitions bode well for attracting more foreign investment capital into the Philippine property market.

Furthermore, the Philippine economy has shown resilience for quite some time, as exhibited by the stable and positive outlook in Gross Domestic Product (GDP). Much of the growth for the Philippine economy is expected to come from the solid growth of personal consumption and government spending. Personal consumption is fuelled by strong remittances from overseas Filipinos, and fiscal spending hinges on the implementation of public-private partnership infrastructure projects that are expected to materialise from 2012 onwards.

However, while the fundamentals for creating a favourable investment climate are taking shape, challenges lie in the ability of the stakeholders to sustain this growth momentum. There are clear economic and business challenges in the near-to-medium term, which are linked to the movements of global economies still reeling from the effects of the recent global economic slowdown.

While the Philippine investment environment remains vulnerable to external business threats and disruptions, the market can be further strengthened through monetary controls and more prudent implementation of pump-priming activities to ensure the domestic economy is sufficiently protected from these external shocks.

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