The Philippines: on the road to become Asia’s roaring tiger
November 12, 2013 / By Claro dG. Cordero Jr.
There was a time in the 1950s when the Philippines was one of the top five economies in Asia. However subsequently for almost five decades, the Philippine economy became the “sick man of Asia”, overtaken by younger economies such as Singapore, Malaysia and even Taiwan due to a series of natural calamities and political crises that impacted on economic growth.
Over the past few years, the Philippine economy gained momentum and it achieved a moderate growth rate due to the combined positive effects of the strong remittances from overseas Filipinos (OFs) and the phenomenal growth of the offshoring & outsourcing (O&O) industry. These two growth factors, combined with the burgeoning tourism industry, form what we call the “three-pronged” growth of the Philippine economy and of the property market in particular.
In the past 12 months, the Philippines managed to achieve a credit/investment rating status upgrade from all of the major credit rating agencies – a feat never before achieved, reinforcing the confidence of investors in the economy.
As of 3Q13, growth in Grade A office rents in the Manila market was estimated at 4.2% y-o-y, due to the continued growth in demand from the O&O industry. Between 3Q12 and 3Q13, the quantity of physical office space leases made by O&O firms in the Makati CBD and Bonifacio Global City (and the surrounding developments) sub-markets grew by 32.1% y-o-y.
OF remittances grew by 6.6% y-o-y in August 2013, fuelling further demand for residential condominiums. As a result, new launches between 3Q12 and 3Q13 increased the pipeline supply for the next five years by more than 12%, while capital values of existing residential condominiums grew by 3.4% y-o-y.
Tourist arrivals grew by as much as 11.3% y-o-y in the January to August 2013 period. The strong growth of tourism arrivals resulted in an additional 2,364 rooms being introduced to the market in Metro Manila between 3Q12 and 3Q13.
The Philippines still has a long way to go towards a more sustainable growth. For one, the economy is not entirely insulated from various externalities that may potentially harm these initial gains. However, perhaps its recent history of undergoing several economic mishaps has somehow prepared the country to adopt policies to instil growth in critical industries such as the property market. While the road to become Asia’s next tiger economy has been clearly set, it remains to be seen whether the “sick man” has, indeed, fully recovered.
