By now, it is clear that the major economies of Southeast Asia are likely to outperform the developed world in the second half of 2022, but what about the Philippines? Let’s take a look.
The key economic trends all favour Southeast Asia as a whole. Meanwhile, Europe and North America face more serious struggles with inflation, a strong dollar, the impact of rising interest rates, energy prices, declining growth rates, and the potential of recession.
The pandemic struck the Philippines hard, severely disrupting economic activity. But the country is surging back. Economists predict GDP growth will hit 6.7% this year. That’s the highest GDP forecast among the major ASEAN countries and just tips Vietnam’s 6.6% growth rate. This is a profound change from the Philippines’ 2020 contraction, which was the largest in ASEAN.
Local demand has surged back, overseas remittances have climbed, and infrastructure projects promise to provide further stimulus. Meanwhile, the new Marcos administration has made reassuring moves by appointing mainstream technocrats to official economic positions, where they are likely to maintain previous policy settings.
The roaring economy’s downside is inflation. After remaining low early in the pandemic, forecasts have the consumer price index hitting 4.8% in 2022 and remaining at 3.7% next year.
This inflation poses a risk to the Philippines’ high-speed economy. The central bank remit is to keep inflation no higher than 4%. Most of this inflation is imported from overseas, along with food and energy.
At IQI Philippines, we believe neither inflation nor higher rates will stifle this economic cycle, and the bounce back from Covid will drive several more quarters of strong growth.
This economic growth is reinvigorating the residential real estate market, local demand in urban Manila is climbing and expats and immigrants are returning from overseas to support the residential rental market.
Our forecast is for residential prices and transaction activity to climb through year-end and into 2023.
Written by Emanuel Andrew Venturina, Managing Director of IQI Philippines
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