Singapore-based banking giant DBS expects investment growth in the Philippines to be robust this year and remain above 10 percent despite some moderation, bolstered by the incoming Duterte Administration’s stated intention to focus on infrastructure development.
In a research note, DBS lauded the incoming administration’s focus on infrastructure development, a policy that aims to speed up infrastructure spending and improve on the public-private partnership (PPP) scheme.
With this, it expects investment growth to remain strong, as reflected by imports of capital goods, which grew by a record-high 49 percent in the first quarter of 2016.
The bank noted in addition that investments in durable equipment jumped 36.6 percent during the same period.
However, DBS did say that some moderation is likely, as the numbers from the first half of the year are partly dis-torted by the election effect.
“While we don’t expect investment growth to maintain the pace seen in the past two quarters, another double-digit investment growth is still likely this year,” it said.
Growth will moderate
DBS said investment growth will moderate from the average 25 percent seen in the past two quarters but will likely remain above 10 percent.
The bank also pointed out that business sentiment remains fairly stable for now, suggesting that the business community is not too concerned about the change in government.
It noted that firms’ capacity utilization has remained high at more than 80 percent, indicating sustained growth in industrial production.
“Note that exports of electronic products grew 4.5 percent in the first quarter of 2016, despite overall export growth being down by 7 percent in the period. That capacity utilization is running at record-highs is likely to contin-ue to spur investment demand going forward,” it said.
DBS added that loan growth has also ticked back up to 14 percent as of March 2016, from an average of 12 percent in the second half of 2015.
Finally, DBS said it is also keeping a close eye on foreign direct investment (FDI) for the remainder of the year.
Total FDI averaged just under $6 billion in 2014 and 2015, or about 1.7 percent of GDP.
“President-elect [Rodrigo] Duterte indicated plans to revise the cap on foreign ownership to 70 percent instead of the current 40 percent. Limits to foreigner’s land-lease are also said to be revised up to 40 years from the current 25-year term,” it said, suggesting these moves if carried out would provide a boost to FDI.